BREAKTHROUGH

ON ALL FRONTS

2 0 0 7 A NNUA L R EPORT
Mission and Vision
We are a leading, dynamic Filipino financial services group with a
global presence committed to delivering a whole range of quality
products and services that will create value and enrich the lives of our
customers, employees, shareholders and communities we serve.

Vision for 2010 and Beyond

To be the most admired financial services organization in the country
in terms of:
• FINANCIAL PERFORMANCE
- Rank #1 or #2 in its businesses in terms of return on equity
• INNOVATIVENESS
- In products, services, distribution and the use of cutting-edge
technology
• CUSTOMER PERCEPTION
- The preferred financial services provider
- Customer-centered organization with a passion for service
excellence
• SOCIAL RESPONSIBILITY
- The employer of choice, a good corporate citizen and partner in
nation-building
• LONG-TERM VISION
- Developing competitive advantage on a sustained basis by
anticipating changes in customers’ preferences and in the manner
of doing business
Contents
1 Consolidated Financial Highlights
2 Message to the Shareholders
8 Operational Highlights

About the Cover

16 Corporate Social Responsibility
17 Corporate Governance
The theme for this Annual Report, “Breakthrough on All Fronts,” 18 Disclosure on Risk Management
effectively summarizes the performance of PNB for the year 2007. 20 Board of Directors
A “breakthrough” denotes a major advance or discovery, an act
24 Senior Management Team
of breaking through an obstacle. For PNB, it was a year where it broke
performance records, made key innovations in process and infrastructure, 26 Products and Services
and transformed into a Bank that is a main force to reckon with in the 30 The Bank’s Congenerics
banking industry. 32 2007 List of Distinctions
Your Bank scored major breakthroughs: a five-year high in net income
33 Financial Statements
since its turnaround in 2003; an increase in capitalization through a successful
follow-on equity offering; becoming a fully private bank; and significant 118 Management Directory
improvements in practically all segments of the Bank’s business. 122 Directory of Branches and Offices
 BREAKTHROUGH ON ALL FRONTS 1

Consolidated Financial HIGHLIGHTS

(In Thousand Pesos, Except Per Share Amounts)

December 31
2007 2006

Results of Operations

Gross Income 19,940,996 20,172,979
Total Expenses 18,442,546 19,352,950
Net Income 1,498,450 820,029

Financial Condition

Total Assets 239,705,040 243,471,065
Loans and Receivables 76,575,031 83,592,219
Total Liabilities 209,475,922 218,714,790
Deposit Liabilities 178,811,969 181,667,692
Total Equity 30,229,118 24,756,275

Per Share1/

Basic / Diluted Earnings Per Share 2.43 1.42
Book Value Per Share 45.48 43.01

1/ attributable to equity holders of the Parent Company



Florencia G. Tarriela Omar Byron T. Mier
Chairman Vice Chairman, President and CEO
 BREAKTHROUGH ON ALL FRONTS 3

Message to the SHAREHOLDERS

P
hilippine National Bank accelerated its growth momentum in
2007 and exceeded targets and expectations, thus achieving
significant breakthroughs on all fronts:

• Your Bank’s surge in profitability surpassed even the growth rate of the industry.
• The growth was broad-based as improvements were made in practically all the major
segments of the Bank’s business.
• We increased capital substantially through a follow-on equity offering which was highly
successful and considered as the biggest in Philippine banking.
• We brought down our non-performing loans level by 63% over the last two years.
• The Bank prepaid its P6.1 billion obligation to the Philippine Deposit Insurance
Corporation four years ahead of the loan’s due date.
• We implemented initiatives and innovations aimed at further fortifying organizational
capability and operational efficiency.

These positive developments and the complete divestment of the government’s

remaining 12% stake in PNB ushered your Bank’s transition into a fully private bank.
Your Bank’s performance in 2007 affirmed the wisdom of the three-pronged business
objective that we have pursued in the last three years: strengthen core businesses; reduce
non-performing assets; and increase profitability.

BREAKTHROUGHS IN FINANCIAL PERFORMANCE

Your Bank’s breakthrough performance was exemplified by the P1.5 billion net income
achieved in 2007, its best performance since its turnaround in 2003. This represents a
remarkable 83% growth year-on-year and a 29-fold increase over the last five years. It
is noteworthy to mention that had your Bank not set aside a substantial provisioning for
probable losses, it could have registered a net income of P 4.8 billion.
Despite the low interest rate scenario that prevailed last year, net interest income rose
by 10%. Contributing to this were the significant increases in loans granted to SMEs, LGUs
and consumers that have higher margins as these market segments are less sensitive to
changes in interest rates. Our traditional stronghold, the LGU market, and our emerging
SME market posted growth at 8% and 25%, respectively. We nearly doubled our bookings
of motor vehicle and housing loans from P845 million to P1.5 billion. Moreover, your Bank
continued to have one of the lowest cost of funds in the industry of 2.1% as CASA accounts
comprised almost half of its total deposits of P 178.8 billion.
On the other hand, fee-based income generated from deposit-related transactions and
the remittance business, coupled with trading gains contributed significantly to the Bank’s
revenue stream at P 3.0 billion.
4 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Message to the SHAREHOLDERS

Our initiatives to streamline operations enabled us

to achieve a marginal 6% increase in cost and expenses.
Consequently, cost-to-income ratio improved to 62.3%
from 66.1% the previous year.

FURTHER STRENGTHENING CAPITAL BASE

In compliance with BASEL II requirements and in
anticipation of new business growth, your Bank continued
to undertake capital raising activity in 2007. PNB’s follow-
on equity offering in August was highly oversubscribed,
infusing fresh capital of P 5.1 billion. As a result, total capital
increased to P 30.2 billion at year-end, bringing its capital
adequacy ratio to 19.0%, far exceeding the minimum 10%
ratio required by the Bangko Sentral ng Pilipinas (BSP).

CONTINUED PROGRESS IN IMPROVING

ASSET QUALITY
Asset quality improved further with the decline in non-
performing loans (NPL) to a more comfortable level of P 10.3
billion in 2007 from a peak of P 45.2 billion in 2003. This brought the Bank’s NPL ratio to
10.4% as of year-end 2007 from 46.0% five years ago.
We also continued our efforts in disposing acquired assets, resulting in a 9% decrease
in total acquired assets in four years. The additional reduction brought down the ratio of
acquired assets to total assets from 13% to 10%.

BREAKTHROUGHS IN EXPANDING CORE BUSINESSES

The inherent strength of the PNB franchise lies in the following: extensive and strategically
located overseas and domestic branches; a strong brand emanating from its ninety-one year
banking history; and a stronghold in the remittance and LGU markets. Your Bank capitalized
on these strengths to further improve its core businesses.
Your Bank embarked on efforts to upgrade branch facilities to provide clients with
better and more efficient service. PNB completed crafting its Model Branch Program in 2007
and is scheduled for rollout in 2008.
We are happy to inform you that your Bank was granted the authority to accept
government deposits on a continuing basis despite having been transformed into a fully
private bank. With the improvement in its financial condition, your Bank met the requirements
and criteria set by the BSP for granting said authority.
Through these many years, PNB has been at the forefront of serving the evolving needs
of Filipino overseas workers, thus maintaining its stature as the bank of the Global Filipino.
 BREAKTHROUGH ON ALL FRONTS 5

Your Bank’s breakthrough

performance was
exemplified by the
P1.5 billion net income
achieved in 2007,
its best performance
since its turnaround
in 2003... a remarkable
83% growth year-on-
year, and a 29-fold
increase over the last
five years.

Your Bank reengineered a number of its remittance products and forged relationships
with strategic business partners both local and overseas. PNB now has a network of 3,000
domestic payment outlets, one of the widest in the remittance business. PNB also launched
the PNB Cargo Services, Inc. to provide freight forwarding services to Global Filipinos in the
United States.
In addition, the Global Filipino Auto Loan Program was offered to complement the
growing Own a Philippine Home Loan Program. Both financing programs are open to
Filipinos working abroad who may want to invest on real estate properties or provide a
motor vehicle for their families back home.

BREAKTHROUGHS IN FORTIFYING INSTITUTIONAL STRENGTHS

2007 was also a year spent in fortifying institutional strengths. We made significant
investments in systems and technology. We reorganized and realigned a number of our
business units to make them more efficient and effective in responding to the growing
needs of our banking public. We likewise stepped up our human resource development
programs to empower our people.
Your Bank has started implementing a new generation core banking system: I-flex
Solutions’ FLEXCUBE—an end-to-end solution designed to automate your Bank’s corporate
and retail banking businesses. It will enable PNB to enhance service delivery across its
multiple channels and branches—both local and overseas; offer a consolidated view of its
6 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Message to the SHAREHOLDERS

A highly oversubscribed
follow-on equity offering
infused fresh capital of
P5.1 billion. As a result,
total capital stood at
P 30.2 billion at year-
end, translating into a
capital adequacy ratio of
19.0%, by far exceeding
the minimum 10% ratio
required by the Bangko
Sentral ng Pilipinas.

customers across segments with 24-hour all year round capability; and effectively in-source
core overseas technology operations to its global data center in the Philippines.
We restructured some segments of our organization to improve our ability to serve
our customers, generate revenues, and tap into new markets. We reorganized geographic
groupings as well as the oversight sales and service functions in branch banking to ensure
that our branches remain focused on providing our customers with excellent service. We
also put in place measures to reinvigorate our consumer lending business and strengthened
product management throughout the organization.
All our initiatives adhered to the risk management framework that we adopted to
identify, measure and manage risks.
We intensified investment in our people through various human resource management
and development programs. In 2007, for example, more than 65% of PNB employees
underwent various training and development programs to bring competencies at par with
business requirements.
We implemented GIFTSWEB, an enhanced due diligence anti-money laundering solution
which fulfills the strict and complex regulatory requirements for the detection, monitoring
and reporting of suspected money laundering activities.
Our hard work continued to reap rewards. Your Bank was, once again, the recipient of
several noteworthy awards and commendations during the year. For the fourth straight year
 BREAKTHROUGH ON ALL FRONTS 7

since 2004, your Bank was accorded the Readers’ Digest

prestigious Trusted Brand Award in the Gold Category.
In the same year, your Bank was likewise honored with
the following: Bangko Sentral ng Pilipinas Stakeholders’
Award as Outstanding Commercial Bank Reporter on OFW
Remittances for the second consecutive year; and Balikat ng
Bayan Hall of Fame Award conferred by the Social Security
System for winning the Best Paying Bank Award a total
of eight times. We are grateful for these endorsements
and take pride in the confidence that they provide to our
customers and shareholders.

SUSTAINING BREAKTHROUGHS
Moving forward, we shall remain focused on further
developing those capabilities that have made us resilient
and better equipped to take on the challenges and
opportunities of a global business environment that has
increasingly become more competitive.
We look forward to the planned merger between PNB
and Allied Banking Corporation in the third quarter of 2008. The merger will harness the
synergy of the two banks, thus improving the industry ranking of PNB, the surviving bank.
Our aim is not just to be the premier financial institution in the country but more
importantly, to better serve our various stakeholders, in particular, our customers who have
given us their continued trust and patronage.
As in the past, we dedicate our efforts to our shareholders, our customers, our employees,
and our fellow countrymen who provide a wellspring of inspiration and guidance. We shall
endeavor to sustain the legacy of our 91-year history and remain as an instrument of the
country’s economic growth and a conduit for achieving the Filipino people’s hopes and
aspirations for a better life.

Florencia G. Tarriela Omar Byron T. Mier

Chairman Vice Chairman, President and CEO
8 P PH HI ILLI I PP P II NN EE N NA A
T ITOI NOANL A BL A NB KA N
2 0K 0 7 A N N U A L R E P O R T

Operational HIGHLIGHTS

RETAIL BANKING
In 2007, PNB implemented four key initiatives to boost its retail business:
enhance customer experience across multi-channel contact points; rationalize
geographical presence; introduce products and services to meet evolving
market needs; and improve operational efficiency.
A Model Branch Program was launched during the year with the
rollout of a modern banking hub in Alabang featuring convenient customer
amenities and staffed by seasoned banking professionals. The Model Branch
Program aims to provide clients with better and more efficient customer
service. A total of 17 branch renovations and 6 branch relocations were also
completed to improve customer access and convenience.
Furthermore, 58 new ATMs were deployed in strategic onsite and offsite
locations, bringing PNB’s total ATM network to 393 by the end of the year.
The high online serviceability, security and convenience of the Bank’s ATM
network earned citations for PNB as the top ranked MegaLink member bank
in terms of ATM reply rate and also one of the best performing banks in
terms of controllable approval rate and host availability.
The Bank utilized the latest technology to deliver more responsive
banking services to its clients, reduce costs, and improve productivity. In
2007, PNB current account depositors started to receive their Statements
of Account with scanned images in lieu of the usual computer printed
sheets and actual physical checks. This enables clients to enjoy the
convenience and benefits of digital technology in organizing their
account records and checks, at par with the standards in the USA, South
America and United Kingdom.
To ensure optimal efficiency in checks processing, the Bank also launched
the Electronic Imaging and Signature Verification System, which integrates
processing, imaging and signature verification of clearing checks into one
automated system. And for added client security, the Bank completed
the ATM Key Encryption Project, thus making its ATMs compliant with
international security standards.

CONSUMER FINANCE
The Bank’s consumer lending business broke new highs in 2007 as total
outstanding consumer loans portfolio rose by 16% from previous year’s
level. The Consumer Banking Sector capitalized on the favorable interest
rates scenario during the year that spurred housing, motor vehicle and
personal loan borrowings.
 BREAKTHROUGH ON ALL FRONTS 9

Amidst a constantly changing environment,

PNB continues to be a dynamic financial
institution that offers a wide array of
products and services that meet the diverse
and evolving needs of the Consumer Market.
10 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Marketing efforts were stepped up and

synergies with key business partners were
further strengthened to make consumer
loans more accessible to the target markets.
Tie-ups with major property developers were expanded. PNB’s unique was also enhanced to enable overseas
Overseas Philippine Home Loan Program also continued to gain significant Filipinos interested to avail of the Bank’s
inroads particularly in the USA, which now accounts for 71% of this portfolio. Global Filipino Auto Loan Program to
The program allows overseas Filipinos to sign up for a loan at PNB’s overseas do online loan calculation; check on
branches to purchase a home in the Philippines. the database of various auto models
For auto loans, fleet financing was offered to existing corporate accounts and prices; and inquire on their loan
while retail sales were aggressively marketed by the revitalized Regional application status.
Consumer Finance Centers. A fully automated motor vehicle loan approval
system was likewise put in place during the year to improve customer INTERNATIONAL BANKING
servicing and support business expansion. The Global Filipino Auto Loan Despite stiff competition posed by
Program, which enables overseas Filipinos to purchase motor vehicles for traditional and non-traditional market
use of their loved ones in the Philippines, was launched in the first quarter players, PNB strengthened its franchise
of 2007 initially in Hong Kong and later in Saudi Arabia. The PNB website in the remittance business by being one
 BREAKTHROUGH ON ALL FRONTS 11

Operational HIGHLIGHTS

suite of products and services. Dedicated OFW lanes

were set up in branches with high volume of remittance
clients to ensure quick servicing of payout transactions.
PNB Remittance Centers, Inc. (PNB RCI) in Los Angeles
started offering web-based remittance that allows clients
to simply sign up and send money from their US bank
accounts via the Internet. The Dollar door-to-door service
was also introduced in all overseas offices as a safe way
of sending dollars to the Philippines. Towards the end of
the year, the Bank ventured into cargo business in the US
West Coast through PNB Cargo Services, Inc., a wholly-
owned subsidiary. This business is capitalizing on overseas
Filipinos’ tradition of sending gifts to their families in the
Philippines. The service was initially offered in California
and will be later expanded to cover other areas in the
United States.
PNB’s Global Filipino Card (GFC), a reloadable pre-paid
card which allows remittance beneficiaries to access their
funds through any ATM in the Philippines, was enhanced
with the addition of a membership benefit. GFC clients in
California enjoy, for a modest fee, membership perks like
Accident Insurance Coverage of US$ 5,000; discounts on
remittance fee for repeat transactions, cargo services, phone cards purchased
of the only two local remittance service from PNB RCI and Philippine real estate tax payments.
providers that can guarantee that funds The Bank continued to accelerate the expansion of its remittance network
sent for payout are available within through strategic alliances with firms both here and abroad. Among the
seconds. PNB cornered 18% of the Bank’s new local partners are Cebuana Lhuillier, Globe Telecom’s G-Exchange
total remittances coursed through the Inc., which operates the GCash outlets, Philippine Rural Banking Corporation
banking system in 2007. This affirms and Prime Asia Pawnshop. Through these outlets, OFW beneficiaries can
PNB’s strong foothold in the remittance claim their remittances seven days a week, even beyond banking hours,
business and its commitment in right in their communities. Overseas, the Bank partnered with P2P Paytrends
providing Global Filipinos with the most Corporation of Canada to tap its 500 agents.
convenient, affordable, secure and In 2007, PNB also bolstered its presence in Europe with the opening
speedy remittance service wherever of the Paris Branch of PNB Europe Plc. This major milestone was followed
they may be. by the opening of three branches of PNB subsidiaries in Miami, HongKong
PNB is proud to have launched four and Barcelona. With a total of 105 overseas offices and 672 correspondent
new remittance services in 2007 to banks as of year-end 2007, the Bank’s global presence remains unmatched
further expand an already impressive by any local bank.
12 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Operational HIGHLIGHTS

CORPORATE BANKING
PNB’s corporate loan portfolio grew by 11% as the Bank’s Business
Development Sector (BDS) embarked on an aggressive marketing and credit
risk management strategy that emphasized generating new partnerships,
strengthening existing relationships with corporate and government clients
and improving lending infrastructure and delivery systems.
During the year, the Bank also focused its efforts in fortifying its presence
in the small-and-medium enterprise (SME) market. Loans to SMEs grew by
25%, accounting for almost 25% of the sector’s loan portfolio in 2007. The
Bank’s commercial lending centers strategically located in the major cities
nationwide were instrumental in mobilizing funding for SMEs.
Meanwhile, loans to the government sector expanded by 8% despite
the statutory 90-day freeze on public works during an election year. PNB’s
BDS and Treasury Group collaborated to introduce bond underwriting as
an alternative financing for local government units (LGUs). By year-end, the
Bank facilitated the issuance of P 500 million LGU bonds.
Lending to large private corporations expanded by 4%, comprising
45% of total corporate loans. A major milestone for corporate lending was
PNB’s participation as one of the co-lenders in the landmark US$ 380 million
financing for the privatization of the Magat Hydropower Plant. The Magat
loan syndication achieved several firsts: the first power sector privatization
in Asia with significant foreign participation (International Finance Corp. efficiency and speed in the settlement of
and Nordic Investment Bank); the first financing in the Philippines in which financial obligations between suppliers
lenders assumed electricity market risk; and the first major financing that and customers. Moreover, the Bank’s
included a significant amount of long-tenor Philippine peso financing. The Corporate Internet Banking facility was
deal bagged four citations from prestigious international finance magazines introduced to allow corporate clients to
that conduct research and analysis on project financing developments around conveniently manage their day-to-day
the world, to wit: Best Project Finance and Best Privatization given by The banking transactions online.
Asset Magazine (Triple A House and Deal Awards 2007); Asia Pacific Power In 2007, the BDS underwent
Deal of the Year given by the Project Finance International; and the Best reorganization to enable it to focus on
Vanilla Deal in Southeast Asia awarded by Alpha Southeast Asia Magazine. market and business development. In
PNB’s various business banking services helped in strengthening and particular, the credit evaluation function
expanding relationships with institutional clients. The Bank’s comprehensive was spun off to a separate unit.
collection platform provides payment convenience to customers of PNB Continuous improvements in credit
clients using the Bank’s multi-channel capabilities—branch counters, ATM, processing and documentation were
Internet banking, phone and mobile banking while other business banking also undertaken to make sure that BDS
solutions like the Paywise and CashMover address their disbursement is in a better position to meet market
requirements. The Corporate e-Pay solution was enhanced to provide greater demands.
 BREAKTHROUGH ON ALL FRONTS 13

Through its broad range of corporate banking

products and services, PNB caters to the needs
of SMEs, LGUs and large private corporations,
the country’s economic prime movers.

TREASURY financial institutions. Amidst this scenario, trading activity appropriately

The year 2007 was a very took defensive strategies to address the high volatility of the overseas credit
challenging year for the Bank’s treasury default swap markets. This was exacerbated on the domestic front by a
business. The turmoil in the global shortfall in government’s tax collection efforts, which pushed domestic
financial markets triggered by the interest rates higher for most part of the year. Nonetheless, PNB managed
sub-prime crisis in the United States to post a net trading and investment gain of P 1.1 billion and a foreign
in the middle of the year put upward exchange gain of almost P 900 million.
pressure on prices of U.S. dollar- Low-risk structured products were utilized to enhance the yield of the
denominated instruments issued by Bank’s investments. Moreover, in its continuing bid to tap into other income
14 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

streams and expand trading opportunities, an Equity Trading Division A Joint Auction Agreement with
was formed in the fourth quarter of 2007. Throughout the year, Treasury Allied Banking Corporation was forged to
continued to beef up its personnel complement and enhanced the skills take advantage of synergies in marketing,
of its staff through continuous training. In line with developments in the advertising and logistical support. As a
regulatory environment, Treasury, in collaboration with the Risk Management result, eleven joint auctions in various parts
Group, strengthened its risk management tools by reviewing, updating and of the country were conducted during the
expanding its set of risk limits. year and actively participated in by branches
of both banks. The Bank likewise inked its
ASSET MANAGEMENT first joint venture deal with Eton Properties
PNB’s asset disposal program went on high gear in 2007. The Philippines Inc., the real estate flagship of
upswing in the real estate market coupled with the implementation the LT Group of Companies. PNB looks
of new programs and strategies; and the re-engineering of the Bank’s forward to closing more joint ventures with
Asset Management Sector enabled PNB to dispose P 1.4 billion worth of strategic partners to generate better value
acquired assets. and returns for the Bank’s ROPAs.
 BREAKTHROUGH ON ALL FRONTS 15

Operational HIGHLIGHTS

program, the ROPA Administration System

(RAS), a fully automated, end-to-end and
centralized inventory and data processing
platform, was rolled out. RAS provides
real-time account history and important
information on the Bank’s acquired assets
portfolio.

REMEDIAL MANAGEMENT
The Bank’s Remedial Management
Sector focused its energies in 2007 on
aggressive collection efforts, restructuring
and foreclosures of non-performing loans
unlike in the previous two years when the
bulk of the reductions were done through
Special Purpose Vehicle (SPV) sales.
Consequently, NPLs were further reduced
to P 10.3 billion.
The Bank also completed in the first
quarter of 2007 the sale of the second pool
of non-performing assets amounting to P 7.6
billion which were part of the total portfolio
sold through an SPV scheme in late 2006.

Meanwhile, the Bank launched the TRUST BANKING

Pabahay Bonanza 2008, a one-year sales The Bank’s total Trust Assets rose by 59% by end-2007 due largely to
campaign to fast track the disposal of low- the higher volume of Investment Management Accounts (IMA), which were
ticket items whose appraised values are mostly invested in the higher-yielding Special Deposit Accounts (SDA) facility
below P1.0 million each. The streamlined of the Bangko Sentral ng Pilipinas.
processing and approval of these assets will During the year, two of the Bank’s seven Unit Investment Trust Funds (UITFs)
relieve the Bank of substantial administrative were cited as among the best managed funds by Lipper Philippines, a Reuters
and handling costs. company that specializes in fund evaluation. It rated the PNB PHISIX UITF as the
To effectively and efficiently dispose best equity fund in 2007 with its 7.07% return, net of taxes, or a gross yield
of the Bank’s acquired assets in the of 8.84% per annum. It also acknowledged the PNB Dollar Profit UITF as the
provinces, the Regional Desk Group of the third highest yielding among all medium-term dollar bond funds with its 4.93%
Asset Management Sector was also re- return, net of taxes, or a gross yield of 6.16% per annum. These fund’s excellent
engineered. Furthermore, to strengthen the rate of return reflected the Bank’s adoption of prudent investment strategies
management of the Bank’s asset disposal derived from rigorous fundamental and strategic research and analysis.
16 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Corporate Social RESPONSIBILITY

EMPOWERING OUR COMMUNITIES FOR A STRONGER NATION

Even as the Bank relentlessly pursued its business objectives, it
accelerated its corporate social responsibility programs by mobilizing
resources to empower the less privileged sectors of society. Over the past
years, your Bank has been focusing on two major initiatives: Education and
community development. These advocacies have received a groundswell of
support from many dedicated Philnabankers who willingly contributed their
time, energies, and own money to make a difference in the lives of others.

Nurturing Young Minds

PNB was an active partner of the Tan Yan Kee Foundation (TYKF), the
social development arm of the Lucio Tan Group of Companies, in its Story
Book Drive Project dubbed as “Sa Pagbasa, May Pag-Asa.” The project aimed
to spark public school pupils’ interest in reading as an important step towards
their holistic development. A total of 18,000 storybooks were collected from
many committed Philnabankers, exceeding the target of 15,000 storybooks.
TYKF matched the contribution of PNB employees, bringing the total
storybooks to 36,000, which benefited 72 public elementary schools all over
the country. Each school received 500 books. Your Bank also supported the
Department of Education’s Brigada Eskwela program when it adopted the
Calumpang Elementary School in Binangonan, Rizal. A 24-man PNB volunteer
team, led by Asset Management Sector Head Christian Jerome O. Dobles,
worked for three days to refurbish the school with a fresh coat of paint. Last
but not least, the Bank brought Christmas cheer to the orphaned children of
Asilo de San Vicente de Paul with its food donation for their holiday festivities.
The bonding with the children proved an enriching experience for the PNB
volunteer employees that participated in the activity.

Building Communities
PNB has also joined forces with Gawad Kalinga (GK). This multi-
sectoral social development movement envisions transforming poverty-
stricken areas into model communities where Filipinos could live in dignity
and peace. To meaningfully celebrate the Bank’s 91st anniversary last July
22, an army of volunteer Philnabankers willingly toted shovels, rollers and
brushes in the searing sun to help complete the GK Sunshineville Village
in BF Resort, Las Piñas. The Bank’s involvement in the GK movement was
further strengthened with the donation in December 2007 of a valuable real
estate property in Lubao, Pampanga as the future site of a PNB-GK Village.
Fund raising efforts are ongoing in the PNB community to build at least 10
homes by next year.
PNB looks forward to the coming years with more meaningful programs
and projects where it could share its blessings as a way of paying forward,
particularly, the underprivileged communities, whose children deserve safer
haven and educational opportunities to ensure their better future and
ultimately a stronger nation for all.
 BREAKTHROUGH ON ALL FRONTS 17

Corporate GOVERNANCE

CORPORATE GOVERNANCE Evaluation System

The Bank adheres to the principles of good governance The captioned system consists of a personal assessment
as culled from leading best practices internationally and process by the Bank’s Directors of themselves, as members of
on a national level. It subscribes to the philosophy of various Board Committees and of the Board of Directors. The
integrity, accountability and transparency in its manner recently Revised Board Evaluation Sheets are based on the
of doing business, fair dealing with its clients, investors, Corporate Governance Scorecard for Publicly-Listed Companies
staff, stockholders and its various publics, professionalism (CG-Sc) circulated by the Securities and Exchange Commission
in managing the company and its subsidiaries and respect (SEC) and the self-assessment form adopted by PNB in compliance
for the laws and regulations of the countries affecting with the requirements of the Bangko Sentral ng Pilipinas (BSP).
its business. Internally, it follows a philosophy of rational These were combined together into a concise form which
checks and balances as well as a structured approach to its substantially complies with the requirements of both the SEC and
operating processes. the BSP. The Directors’ evaluation of the Board Committees have
The Bank has promulgated a Revised Manual on to be reviewed and evaluated by the respective Committees en
Corporate Governance which provides for the appointment banc. After that the Director’s self-assessment of themselves,
of a senior officer to ensure compliance with the provisions of the Board Committees’ en banc evaluation of the Directors’
the Manual. The Directors, Board Advisor and some Executive assessment of each Committee, and the Directors’ evaluation
Officers of the Bank have taken a course on Corporate of the Board of Directors will undergo a proper review and
Governance to be able to understand and implement the evaluation by the Corporate Governance Committee before final
principles thereof in a consistent and satisfactory manner. submission to the Board of Directors. Thereafter, the Compliance
Officer will compile and tabulate all the evaluation results and
Measures to Fully Comply with issue a certification to the SEC on January 30th of each year on
Corporate Governance the extent and quality of compliance with the Bank’s Corporate
Under the Manual, compliance with the principles of Governance Manual based on the results of the Board’s self-
good corporate governance principally starts with the Board assessment/evaluation.
of Directors. It is the Board’s responsibility to foster the long-
term success of the corporation and secure its sustained No Material Deviations
competitiveness in accordance with its fiduciary responsibility. Because of the heightened sense of accountability among
In order to have a central focus for the Bank’s activities, the the staff and an enhanced culture of compliance within the
Board has appropriately established the company’s Mission whole Bank, there have been no material deviations noted by the
and Vision Statements. Compliance Officer.
To have a structure for compliance, the Manual
established and defined the responsibilities and functions of Plans To Improve Corporate Governance
the Board and the various Committees necessary for good The Manual was updated on July 28, 2006, September 28,
governance, i.e., the Corporate Governance Committee, 2007, November 23, 2007, February 22, 2008 and April 25, 2008.
the Board Audit and Compliance Committee, the Risk Apart from these updates, there are no other plans to change the
Management Committee and the roles of the External and Manual for the moment.
Internal Auditors and the Corporate Secretary. The Manual
also established an evaluation system by which the Directors
and the Executive Officers can rate the Bank periodically
against certain leading practices and principles on good
corporate governance. Last but not least, the Manual made
provisions for the protection of Investors’ Rights including
Minority Interests.
18 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Disclosure on Risk MANAGEMENT

OVERVIEW OF THE RISK MANAGEMENT PROCESS MARKET RISK

PNB firmly believes that risk management is not merely for Market, Balance Sheet and Liquidity risks, on the other hand,
regulatory compliance but a strategic discipline, which builds are managed using a framework of policies, control procedures
competitive advantage and ultimately long-term shareholder value. and limits. This framework is supported through active Board and
Therefore, risk management is a top-level priority overseen by the Senior Management oversight. The limits are reviewed annually
Risk Management Committee (RMC), a Board level committee. by the Treasury Sector (the risk taking unit) in coordination with
The RMC is vested with the authority to approve the Bank’s risk RMG and approved by the Bank’s Assets & Liabilities Committee
management process, framework, policies, risk appetite and (ALCO), the RMC and the Board of Directors. The Board, through
risk management infrastructure. The Risk Management Group the RMC, and senior management are kept abreast of market
(RMG), which is headed by a Chief Risk Officer, supervises the risk risks through periodic reporting of the RMG. Internal Audit also
management activities at the operational level. provides for additional oversight inspection on the consistency
The Bank’s Enterprise Risk Management (ERM) framework of the engaged activity and reporting. The following are the
has the following objectives: institutionalize the risk management regular monitors:
process; define and disseminate the Bank’s risk philosophy and • Market Risk—this is dimensioned and controlled in both the
objectives; develop the risk management infrastructure; identify, trading book and balance sheet. In the trading book, it is
measure, analyze, and manage risks inherent to all the Bank’s controlled by a daily analysis of the Value-at-Risk (VAR) of trading
activities; and assist the risk taking business and operating units in instruments under normal market conditions. The volatilities
understanding and measuring risk/return profiles. This framework used are those for a rolling one-year period, updated quarterly.
revolves around eight (8) risk management approaches: internal To complement the VAR measure, stress tests are performed
environment scanning, objective setting, event identification, wherein the trading portfolios are valued under extreme market
risk assessment, risk response, control activities, information and and stop loss limits.
communication, and monitoring • Interest Rate risk in the Banking Book—impact of changes in
Under the ERM, the key risks that the Bank faces such as interest rates are assessed over a one-year period using Earnings-
credit risks, market risk, liquidity risk, interest rate risk, operational at-Risk (EAR), which arrays assets and liabilities according to
risk, technology risk, strategic and business risks, compliance risk, their repricing profile and tempered by approved assumptions.
and legal risk are not only monitored under their separate and • Liquidity Risk—this is monitored and controlled primarily via
distinct components, but also monitored across the interrelated a gap analysis of maturities of relevant assets and liabilities
components. reflected in the MCO report as well as an analysis of liquid
assets. Further, an internal liquidity ratio has been set to
CREDIT RISK determine sufficiency of liquid assets over deposit liabilities.
The Bank prudently manages its credit risk at the strategic Also a concentration risk in funding is tracked by the Large
level, portfolio level down to the individual credit or transaction. Funders Report.
The Board is involved in this aspect through the oversight
function of the RMC. Senior management plays an active role OPERATIONAL RISK
in managing credit based on the core principles of sound credit The management of operational risk is focused on the
supervision. Additionally, credit risk management infrastructures protection of the Bank’s capital and earnings through the utilization
are implemented across the organization. These include: of operational risk management tools. PNB is embarking on the
continuing review of credit risk policies, systems and procedures; implementation of Basel II compliant operational risk controls.
rationalization of the credit risk functional organization; While the Bank opted to compute capital charge for Operational
continuing review of the internal credit limit structure; adoption Risk using the simple Basic Indicator Approach, a more structured
of updated systems and technology; centralized Management framework is now in place covering risk identification, analysis,
Information System (MIS); granularized Credit Risk Rating System; monitoring and mitigation. This means adopting the best practices
and periodic review of the adequacy of loan loss reserves. principles for operational risk management imposed by Basel II.
 BREAKTHROUGH ON ALL FRONTS 19

INFORMATION SECURITY AND TECHNOLOGY RISK Under the Market Risk management process, the Bank has
Information Security and Technology Risk is a shared approved limits on its trading portfolio as well as on its investment
responsibility of everyone in the Bank. The Board plays an important portfolio. This is done for both local and foreign currency trading
role through its review and approval of new technology projects portfolios. Market limits are reviewed on an annual basis and
and oversight functions. Senior management also embraces the appropriately adjusted to reflect the Bank’s direction in trading
day-to-day monitoring of said projects. risks, and asset-liability mix targets.
Internal controls and monitoring efforts for managing this Under the Liquidity Risk/Interest Rate Risk management
type of risk include, among others, the following: process, the Bank’s current monitoring tools are as follows:
• Creation of an independent Information Security & Technology Maximum Cumulative Outflow, Stress Testing, Liquid Assets Array,
Risk Unit under the umbrella of RMG Liquidity Ratios and Earnings at Risk Limit.
• Adoption and customization of the technology risk management The Bank has adopted the following principles on best
framework and the conduct of information security assessment practices for operational risk management imposed by Basel II:
• Inventory, review or updating of all existing systems to determine • Oversight of the Board of Directors through the RMC
its efficiency and applicability • Accountability and direct involvement of the Management in
• Documentation of policies and procedures on information managing Operational Risk
security and technology process • Well-defined risk management policies contained in the
• Continuous training of existing manpower to keep abreast with Operational Risk Management Manual
technology development and continuous screening of qualified • Designation of Risk Overseer in each business line and
applicants to maintain sufficient number of workforce operating unit
• Defining and testing the Business Contingency Plan, including • Independent risk management function, compliance function
system software back-ups, to ensure continuity of operations in and audit function
the event of disruptions • Shared risk management responsibility across the organization
• Conduct of vulnerability assessment and penetration testing to from top level to the lowest staff in the organization
identify gaps/vulnerability and implement remedial measures
• Monitoring/review of all outsourcing activities To cover operational risks, the Bank maintains the following
• Consistent monitoring of systems to address downtime and management tools and processes:
causes of failure • Business Contingency Plan
• Back-Up and Recovery Program
BASEL II IMPLEMENTATION • Risk and Control Self-Assessment
The Bank’s Basel II compliance roadmap is in place. A Basel II • Operational risk mapping to Eight Business Lines
team is now fully engaged to follow through with both current and • Product/Project Management Business Model
future requirements that regulators and global standards require.
The Bank is compliant with BSP’s requirement on the quarterly The Bank’s risk management process is continuously being
reporting of the bank’s Capital Adequacy Ratio. reviewed and strengthened as part of an intrinsic discipline to
For Credit Risk management, the Bank has clearly defined achieve a high quality portfolio of risk assets and to make the
measurement areas of monitoring to comply to both BSP and institution fully in step with Basel II implementation.
internal requirements. These are regularly reported to the RMC by
the Compliance Division and the RMG.
Mandatory compliance requirements cover loans, investments,
reserves, foreign currency, and MOU limits, among others. Internal
compliance requirements, on the other hand, include Single
Borrower’s Limit, DOSRI ceilings per BSP guidelines, target industry
limits, limits on Financial Institutions, country risk limit, and treasury
risk limit.
20 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Board of DIRECTORS
 BREAKTHROUGH ON ALL FRONTS 21

Members of the Board from left to right:

Omar Byron T. Mier - Vice Chairman, President & CEO Domingo T. Chua - Director
Florencia G. Tarriela - Chairman Eric O. Recto - Director
Washington Z. Sycip - Director Lucio C. Tan - Director
22 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Board of DIRECTORS
 BREAKTHROUGH ON ALL FRONTS 23

Members of the Board from left to right:

Macario U. Te - Director Carmen G. Huang - Director
Jose Ngaw - Board Advisor Lucio K. Tan, Jr. - Director
Feliciano L. Miranda, Jr. - Director Renato J. Fernandez - Corporate Secretary
Florido P. Casuela - Director
24 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Senior Management TEAM

Front row, from left to right: Third row, from left to right:
EVP Carmen G. Huang - Chief Financial Officer & Chief of Staff to the President FSVP Ramon L. Lim - Head, Treasury Sector
EVP Ma. Elena B. Piccio - Head, Business Development Sector FSVP Rafael Z. Sison, Jr. - Head, Retail Banking Sector
Second row, from left to right: FSVP Jovencio B. Hernandez - Head, Consumer Banking Sector
EVP Renato A. Castillo - Chief Credit Officer & Head
Remedial Management Sector
EVP Anthony Q. Chua - Head, Global Operations Sector
EVP Cynthia V. Javier - Chief Technology Officer & Head
Global Technology Sector
FSVP Ma. Elena S. Sarmiento - Trust Officer & Head, Trust Banking Group
 BREAKTHROUGH ON ALL FRONTS 25

Senior Management TEAM

Front row, from left to right: Third row, from left to right:
SVP Carmela A. Pama - Chief Risk Officer & Head, Risk Management Group FSVP Alvin C. Go - Chief Legal Counsel & Head, Legal Group
FSVP Cris S. Cabalatungan - Head, Internal Audit Group Rommel R. Garcia - President, PNB Remittance Center Inc.
Second row, from left to right: & Sector Head, North American Region
SVP Christian Jerome O. Dobles - Head, Asset Management Sector
SVP Maria Paz D. Lim - Treasurer
FSVP Isabelita Manalastas-Watanabe - Head, International Banking & Overseas
Remittance Sector (Europe, Israel & African Continent)
FSVP Edgardo T. Nallas - Head, Human Resource Group
26 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Products and SERVICES

DEPOSITS AND RELATED SERVICES Disbursements

Peso Accounts Paywise (Payroll Services)
Regular Passbook Savings Account Executive Check Writer System
Superteller Savings Account Corporate ePay
PNB Prime Savings Account PNB e-Tax Payment Facility
OFW Savings Account
SSS Savings Account e-Banking Services
GSIS Savings Account Personal Internet Banking
PNB Direct Deposit Account Corporate Internet Banking
Regular Checking Account Phone Banking
Budget Checking Account Mobile Banking
PNBig Checking Account ATM
Priority One Checking Account
eXecutive Checking Account Other Services
COMBO Account Safety Deposit Boxes
Regular Time Deposit
PNBig Savings Account BANCASSURANCE
Peso Wealth Multiplier Account Life Insurance
PNB Pangarap Series Education Package
Foreign Currency Accounts PNB Pangarap Series Pangkabuhayan Package
Dollar Accounts PNB Pangarap Series DollarMAX
U.S. Dollar Savings Account
Greencheck Non-Life Insurance
(Interest-bearing U.S. Dollar Checking Account) Auto Protector Plan
Greenmarket (U.S. Dollar Time Deposit) House Protector Plan
PNB $ M.I.N.T. Account 6-in-1 Family Accident Protector Plan
Euro Accounts
Euro Savings Account FUND TRANSFER SERVICES
Euro Time Deposit Account Money Transfers (Foreign and Domestic)
Remittance via
Business Banking Services Rapid Remit
Collections Electronic Remittance Processing System (ERPS)
e-Collect Integrated Remittance System (IRS)
Cash Mover Payroll Remittance Interface System (PRIS)
Government Services PNB 3D (Door-to-Door Delivery) Remittance Service
Bureau of Internal Revenue Check 3D Remittance Service
Social Security System Cash 3D Remittance Service
Bureau of Customs Door-to-Bank (DTB) Remittance Service
Philhealth US$ 3D Remittance Service
National Home Mortgage Finance Corp. Bills Payment Delivery Service
PNB Global Filipino Money Card (GFMC)
 BREAKTHROUGH ON ALL FRONTS 27

Remittance Bills Payment Service EXPORT / IMPORT SERVICES

Advise & Pay Anywhere Service Export Services
Domestic Branches Advising of Letters of Credit
Pay-out Agents Confirmation of Letters of Credit
Telegraphic/Telex Transfers Export Negotiation/Purchase of Export Documents
S.W.I.F.T. Transfers Drawings under Letters of Credit, Documents
Gross Settlement Real Time (GSRT) against Payment (DP) and Documents against
Real Time Gross Settlement (RTGS-inward) – Peso Acceptance (DA)
End of Day Netting (PDDTS) – Dollar Payment of Exports under Prepayment and Open
End of Day Netting (EPCS) – Peso Account (OA) Arrangements
Demand Drafts (Local/Foreign) Export Financing
Cashier’s/Manager’s Checks
Import Services
Travel Funds Issuance and negotiation of Letters of Credit
FX Currency Notes (Foreign/Domestic)
PNB Mabuhay Peso Travelers Cheque Issuance of Shipside Bonds
Trust Receipt Financing
Regular Collection Service (Foreign and Domestic) Servicing of Importations under Collection
Special Collection Service Arrangement - DA/OA and DP
Standard Collection Service Servicing of Collection of Final Customs Duties
Cash Letter
PNB Direct Deposit Program Special Financing Services
PNB Mabuhay Peso Gift Cheque Issuance of Standby Letters of Credit to serve the
following bank guarantee requirements:
TREASURY PRODUCTS AND SERVICES Loan Repayment Guarantee
Foreign Currency Advance Payment Bonds
Foreign Exchange (Spot, Forward, Swap) Bid Bonds
Foreign Currency Money Market Transactions Performance Bonds
Bonds Dealership Other Bonds
Euro-Notes/Bonds Issuance of Standby Letters of Credit under PNB’s
Convertible Bonds ”Own a Philippine Home Loan Program”
R.P. Sovereign Bonds (ROP, BSP) Issuance and Servicing of Deferred Letters of Credit
U.S. Treasury Bonds as mode of payment for :
Importation or Local Purchase of Capital Goods
Local Currency Services Rendered (e.g., Construction/Installation
Money Market Transactions of Infrastructure Projects, etc.)
Securities Dealership
Government Securities
Treasury Bills
Fixed Rate Treasury Notes/Bonds
Retail Treasury Bonds
Zero-Coupon Bonds
Local Government Unit Bonds
Commercial Papers
28 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Products and SERVICES

LENDING SERVICES Small Business Loans for SMEs
Corporate/Institutional Loans Short-Term Loan
Credit Lines Revolving Credit Line
Revolving Credit Line (RCL) Omnibus Line
Non-revolving Credit Line Term Loan
Omnibus Line
Export Financing Facilities Local Guarantee Facilities
Export Advance Loan PhilEXIM Guarantee
Export Advance Line SB Corp. Guarantee Program
Bills Purchased Lines
Domestic Bills Purchased Line Loans to Local Government Units (LGUs)
Export Bills/Drafts Purchased Line Term Loans
Discounting Line Import LC Facility Against Loan or Cash
Import-Related Loans Domestic Letters of Credit Against Loan or Cash
Letters of Credit Facility Standby Letters of Credit
Trust Receipt Facility Loans Against Deposit Hold Out
Standby Letters of Credit – Foreign/Domestic LGU Contractor Financing
Deferred Letters of Credit – Foreign/Domestic LGU Bond Flotation
Term Loans (thru PNB Capital and Investment Corp.)
Medium-and Long-Term Loan
Short-Term Loan Credit Facilities to Government-Owned and
Project Financing Controlled Corporations/National Government
Loans Against Deposit Hold Out Agencies (GOCCs/NGAs)
Time Loans Term Loans
Agricultural Credit Lines
Commercial Export Financing Facilities
Structured Trade Finance Bills Purchased Lines
Export Credit Agency Lines Import Letters of Credit/Trust Receipts Line
US-EXIM Guarantee Program Standby Letters of Credit
Specialized Lending Programs Structured Trade Finance
DBP Wholesale Lending Facilities Export Credit Agency Lines
LBP Wholesale Lending Facilities Guarantee Program
SSS Wholesale Lending Facilities
BSP Rediscounting Facility Consumer Loans
Sugar Financing Program Sure Fund (Salary Loan)
Sugar Crop Production Line (SCPL) Sure Wheels (Motor Vehicle Loan)
Sugar Quedan Financing Line (SQFL) Sure Home (Housing Loan)
Time Loan Agricultural (TLA) Sure Home Flexi Loan
Operational Loan (OpL) Contract to Sell Financing
Own a Philippine Home
Own an Overseas Home Loan
Loans Against Deposit Hold Out
Peso Loan vs. Peso/FX Deposits
 BREAKTHROUGH ON ALL FRONTS 29

Credit Card Services CONGENERICS

PNB VISA Card Banking
ASTRA Secured Kredit (ASK) Card Philippine National Bank (Europe) PLC

TRUST PRODUCTS AND SERVICES Freight Forwarding

Unit Investment Trust Funds (UITF) PNB RCI Holding Company, Ltd. dba.
PNB Mabuhay Plus UITF PNB Cargo Services, Inc.
PNB Mabuhay Prime UITF
PNB Mabuhay Prestige UITF General Insurance
PNB Dollar Profit UITF PNB General Insurers Co., Inc.
PNB Dollar Punla UITF
PNB Peso Punla UITF Holding Company
PNB PHISIX UITF PNB Holdings Corporation
PNB International Investments Corporation
Special Deposit Account (SDA)
Investment Banking
Corporate Trust Products PNB Capital and Investment Corporation
Corporate Trust
Employee Benefit Trust / Retirement Fund Leasing and Financing
Corporate Investment Management Accounts (IMA) Japan-PNB Leasing and Finance Corporation
Corporate Escrow
POEA Escrow Lending
Japanese Escrow PNB International Finance, Ltd.
Corporate Custodianship
Syndicated Loan Agency Remittance
Collateral Trust / Mortgage Trust Indenture PNB Remittance Centers, Inc. (U.S.A.)
LGU Bonds Trusteeship PNB Remittance Company (Canada)
PNB Remittance Center, Ltd. (Hong Kong)
Personal Trust Products PNB Italy SpA
Living Trust / Personal Trust Accounts PNB Netherlands B.V.
IMA PNB Corporation, Guam
Life Insurance Trust PNB Austria Financial Services GmbH
Educational Trust PNB Global Filipino Remittance Spain, S.A.
Personal Escrow
BIR Escrow Stock Brokerage
Real Estate Escrow PNB Securities, Inc.
Custodianship / Safekeeping
Guardianship
Estate Planning
30 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

The Bank’s CONGENERICS

JAPAN-PNB LEASING AND FINANCE PNB AUSTRIA FINANCIAL SERVICES GMBH
CORPORATION PNB Austria Financial Services GmbH is a wholly-
Japan-PNB Leasing and Finance Corporation is a owned subsidiary of PNB. It is registered as a limited
joint venture between Philippine National Bank and liability company in Vienna, Austria engaged in
well-established Japanese financial institutions, IBJ providing remittance services to Filipinos in Austria
Leasing Co., Ltd. and Mizuho Corporate Bank. The and Switzerland.
principal activities of Japan-PNB Leasing and Finance
Corporation are operating and financial leasing, chattel
mortgage loans, and installment notes discounting. PNB CAPITAL AND INVESTMENT CORPORATION
Likewise, it can arrange lease syndications for big- The PNB Capital and Investment Corporation is
ticket transactions. the wholly-owned investment banking subsidiary
of PNB. It provides a full range of corporate finance
PHILIPPINE NATIONAL BANK (EUROPE) PLC services such as financial advisory, project finance
Philippine National Bank (Europe) PLC is a and private placements, debt and equity syndication
wholly-owned subsidiary incorporated in the United and underwriting. PNB Capital and Investment
Kingdom. It is engaged in full service banking which Corporation also assists in structuring and packaging
includes, among others, deposit services, loans, mergers and acquisitions, securitization transactions
fund transfers, FX trading and documentary credits. and mezzanine financing.
It is also authorized to provide cross-border services
such as acceptance of deposits and other repayable PNB CORPORATION, GUAM
funds from the public; and money transmission PNB Corporation, Guam (PCG) is a wholly-owned
services within the 18 member states of the European subsidiary incorporated in the Territory of Guam
Economic Area (EEA). engaged in foreign exchange remittance service. PCG
Philippine National Bank (Europe) PLC operates has a branch in Saipan.
an extension office at Nottinghill Gate, London and
a branch in Paris, France which primarily handle PNB GLOBAL FILIPINO REMITTANCE SPAIN, S.A.
remittances. PNB Global Filipino Remittance Spain, S.A. is
a wholly-owned subsidiary of PNB that provides
remittance services to Filipinos in Spain. Aside from
its main office in Madrid, it maintains a branch in
Barcelona.
 BREAKTHROUGH ON ALL FRONTS 31

PNB HOLDINGS CORPORATION PNB ITALY SPA

PNB Holdings Corporation is the parent company PNB Italy SpA is a wholly-owned subsidiary
of PNB General Insurers Co., Inc., a non-life insurance incorporated in Italy principally engaged in servicing
company that offers fire, marine, motor car, surety, the remittance requirements of overseas Filipino
casualty, engineering and accident insurance. workers in Italy. It has offices in Rome, Milan and
Florence.
PNB INTERNATIONAL FINANCE, LTD. It owns PNB Netherlands B.V., a remittance
PNB International Finance, Ltd. (PNB IFL) is PNB’s company operating in the Netherlands. The main
wholly-owned subsidiary in Hong Kong principally office of PNB Netherlands B.V. is located in Amsterdam
engaged in granting retail loans to Filipino overseas while its extension office is in Rotterdam.
workers and professionals. Its main office is located
in Central, Hong Kong while its three branches are PNB REMITTANCE CENTER, LTD.
situated in Shatin, Yuen Long and Tsim Shat Sui The PNB Remittance Center, Ltd. (PNB RCL) is PNB’s
(Kowloon). wholly-owned remittance subsidiary in Hong Kong. It
has nine branches that provide remittance services
PNB INTERNATIONAL INVESTMENTS for overseas Filipino workers in Hong Kong. The
CORPORATION company also services the remittance requirements of
PNB International Investments Corporation (PNB Indonesian overseas workers in Hong Kong through a
IIC) is a non-bank holding subsidiary and is the parent remittance tie-up with Bank Mandiri.
company of PNB Remittance Centers, Incorporated
(PNB RCI). PNB RCI has a network of 39 money transfer PNB SECURITIES, INC.
offices in 11 states of the United States of America. The PNB Securities, Inc. (PNBSI) is the wholly-
PNB RCI also owns PNBRCI Holding Company, owned stock brokerage subsidiary of PNB that deals
Ltd., established to be the holding company of PNB in the trading of shares of stocks listed at the stock
Remittance Company (Canada) [PNBRCC]. PNBRCC exchange.
has six offices servicing the remittance requirements
of Filipinos in Canada.
PNBRCI Holding Company, Ltd. began doing
business as PNB Cargo Services, Inc. on August 1,
2007. PNB Cargo Services, Inc. is engaged in sending
balikbayan boxes from the U.S.A. to the Philippines
under a freight forwarding arrangement with a
commercial freight forwarder.
32 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

2007 List of DISTINCTIONS

• Gold Category Winner 2004–2007
Trusted Brand Awards, Reader’s Digest
• Hall of Fame Award–Best Paying Bank
• Best Collecting Bank–OFW Remittances
• Best Paying Commercial Bank
Balikat ng Bayan Awards, Social Security System
• Outstanding Commercial Bank Reporter on OFW Remittances
Stakeholders’ Awards, Bangko Sentral ng Pilipinas
• Highest ATM Reply Rate
• Highest ATM Controllable Rate
MegaLink
• Best Equity Fund–PNB PHISIX Unit Investment Trust Fund
Lipper Philippines
• 3rd Highest Yielding Medium-Term Dollar Bond Fund–
PNB Dollar Profit Unit Investment Trust Fund
Lipper Philippines
• Best Project Finance/Best Privatization–
US$ 380 Million Magat Hydropower Plant Syndicated Loan with:
- PNB Capital and Investment Corporation as one of the peso joint lead arrangers
- PNB as one of the lenders of the peso loan component
The Asset Magazine (Triple A House and Deal Awards)
• Asia Pacific Power Deal of the Year–Magat Hydropower Plant
Project Finance International
FINANCIAL STATEMENTS

Statement of Management’s Responsibility

for Financial Statements 34
Independent Auditors’ Report 35
Balance Sheets 36
Statements of Income 37
Statements of Changes in Equity 38
Statements of Cash Flows 41
Notes to Financial Statements 42


34 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

STATEMENT OF MANAGEMENT’S RESPONSIBILITY

FOR FINANCIAL STATEMENTS

The management of Philippine National Bank and Subsidiaries (the Group) and of Philippine National Bank (the Parent Company) is responsible for
all information and representations contained in the consolidated financial statements of the Group and the Parent Company financial statements
which comprise the balance sheets as at December 31, 2007 and 2006 and the statements of income, statements of changes in equity and
statements of cash flows for each of the three years in the period ended December 31, 2007. These financial statements have been prepared
in accordance with Philippine Financial Reporting Standards, except for the deferral of losses on sale of nonperforming assets (NPAs) to special
purpose vehicles (SPVs) in 2004, 2005 and 2006, non-recognition of allowance for impairment losses as of December 31, 2006 on loans sold to
SPV in 2007 and the non-consolidation of the SPV that acquired the NPAs sold in 2006 and 2007 as allowed under the regulations issued by the
Bangko Sentral ng Pilipinas for banks and financial institutions availing of the provisions of Republic Act No. 9182, The Special Purpose Vehicle Act
of 2002, and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to
materiality.

In this regard, the management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that
transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The
management likewise discloses to the Group’s and Parent Company’s audit committee and to its external auditors: (i) all significant deficiencies in
the design or operation of internal controls that could adversely affect its ability to record, process, and report financial data; (ii) material weaknesses
in the internal controls; and (iii) any fraud that involves management or other employees who exercise significant roles in internal controls.

The Board of Directors reviews the aforementioned financial statements before such statements are approved and submitted to the stockholders.

SyCip, Gorres, Velayo and Co., the independent auditors appointed by the stockholders, have audited the financial statements of the Group
and the Parent Company in accordance with Philippine Standards on Auditing and expressed their opinion on the fairness of presentation upon
completion of such audit, in their report to the Board of Directors and stockholders.

FLORENCIA G. TARRIELA OMAR BYRON T. MIER
Chairman of the Board President & Chief Executive Officer

CARMEN G. HUANG
Executive Vice President & Chief Financial Officer

SUBSCRIBED AND SWORN to before me this 14 day of April 2008 affiants exhibiting to me their Community Tax Certificates, as follows:

Names CTC No. Date of Issue Place of Issue

Florencia G. Tarriela 01362816 January 3, 2008 Manila
Omar Byron T. Mier 16311518 January 25, 2008 Quezon City
Carmen G. Huang 19493148 January 22, 2008 Makati City

Notary Public
Doc. No. 73
Page No. 16
Book No. 1
Series of 2008
 BREAKTHROUGH ON ALL FRONTS 35

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors

Philippine National Bank

We have audited the accompanying consolidated financial statements of Philippine National Bank and Subsidiaries (the Group) and the parent company
financial statements of Philippine National Bank (the Parent Company), which comprise the balance sheets as at December 31, 2007 and 2006 and the
statements of income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2007,
and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting
Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine
Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
As discussed in Notes 9 and 10 to the financial statements, to take advantage of incentives under Republic Act (RA) No. 9182, The Special Purpose Vehicle
Act of 2002, and at the same time improve its chances of recovering from its non-performing assets (NPA), the Parent Company sold certain NPA to special
purpose vehicle (SPV) companies. In accordance with regulatory accounting policies prescribed by the Bangko Sentral ng Pilipinas (BSP) for banks and
financial institutions availing of the provisions of RA No. 9182, losses amounting to P1.9 billion in 2006, P4.3 billion in 2005 and P1.1 billion in 2004 from
the sale of the NPA to the SPV companies, representing the allowance for impairment losses specifically provided for the NPA but released to cover other
impairment losses of the Parent Company, were deferred and are being amortized over a ten-year period.

Also, as discussed in Note 9, the required additional allowance as of December 31, 2006 on the NPA sold in 2007 amounting to P1.3 billion was not
recognized by the Parent Company since it deferred the loss on such sale as allowed by BSP. Had the impairment losses been charged against operations
as required by PFRS, deferred charges and equity would have been decreased by P7.7 billion as of December 31, 2007 and deferred charges and equity
would have been decreased by P6.9 billion and P8.2 billion, respectively, and allowance for credit losses would have been increased by P1.3 billion as
of December 31, 2006, and the 2006 net income would have been decreased by P3.2 billion and 2005 net income would have been increased by
P124.8 million.

The sale of the NPA to the SPV in 2007 and 2006 is considered as a true sale under RA No. 9182 which qualified for derecognition under BSP regulatory
reporting rules. However, PFRS requires that the accounts of the SPV that acquired the NPA of the Parent Company in 2007 and 2006 should be
consolidated into the Group’s accounts. Had the accounts of the SPV been consolidated into the Group’s accounts, total assets and liabilities would
have been increased by P2.0 billion and P1.9 billion, respectively, and minority interest in equity of consolidated entities would have been increased by
P28.8 million as of December 31, 2007. As of December 31, 2006, total assets and minority interest in equity of consolidated subsidiaries would have
been increased by P30.0 million.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group and of the Parent Company as of
December 31, 2007 and 2006, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2007 in
accordance with Philippine Financial Reporting Standards, except for the effects on the 2007 balance sheet, 2006 financial statements and 2005 statement
of income of not recognizing the losses on the NPA sold to SPV companies as discussed in the sixth and seventh paragraphs and the effects in the 2007 and
2006 consolidated financial statements of not consolidating the accounts of the SPV as discussed in the eighth paragraph.

SYCIP GORRES VELAYO & CO.

Wilson P. Tan
Partner
CPA Certificate No. 76737
SEC Accreditation No. 0100-AR-1
Tax Identification No. 102-098-469
PTR No. 0017630, January 3, 2008, Makati City

March 28, 2008

36 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

BALANCE SHEETS
(In Thousand Pesos)

Consolidated Parent Company

December 31
2007 2006 2007 2006
ASSETS
Cash and Other Cash Items (Note 17) P4,773,212 P4,820,155 P4,732,004 P4,753,539
Due from Bangko Sentral ng Pilipinas (Note 17) 27,961,521 12,566,759 27,961,521 12,566,759
Due from Other Banks 3,962,000 3,555,603 2,859,908 2,314,288
Interbank Loans Receivable (Note 33) 13,197,201 22,412,817 12,824,611 22,093,537
Securities Held Under Agreements to Resell (Note 17) 11,200,000 15,700,000 11,200,000 15,700,000
Financial Assets at Fair Value Through Profit or Loss (Note 8) 3,215,235 1,137,835 3,194,086 1,109,137
Loans and Receivables (Notes 9 and 28) 76,575,031 83,592,219 73,162,024 81,465,282
Receivables from Special Purpose Vehicle (Note 10) 726,095 1,361,074 726,095 1,361,074
Available-for-Sale Investments (Notes 11 and 17) 44,821,522 42,824,810 43,961,027 40,822,339
Held-to-Maturity Investments (Note 11) 446,054 1,554,368 362,795 1,420,044
Property and Equipment
At cost (Note 12) 821,810 730,181 714,513 663,916
At appraised value (Note 12) 15,681,869 15,846,819 15,681,869 15,846,819
Investments in Subsidiaries and an Associate (Notes 2 and 13) 665,123 801,838 5,381,139 5,439,520
Investment Properties (Notes 2, 14 and 24) 24,799,602 24,882,076 24,723,885 24,803,748
Deferred Tax Assets (Note 25) 1,857,109 1,847,258 1,798,662 1,794,291
Other Assets (Note 15) 9,001,656 9,837,253 8,842,847 9,499,902
TOTAL ASSETS P239,705,040 P243,471,065 P238,126,986 P241,654,195

LIABILITIES AND EQUITY
Liabilities
Deposit Liabilities (Note 17)
Demand P20,167,642 P17,867,651 P19,952,002 P17,823,367
Savings 137,315,472 140,233,120 137,295,678 140,085,759
Time 21,328,855 23,566,921 23,642,993 25,823,838
178,811,969 181,667,692 180,890,673 183,732,964
Bills and Acceptances Payable (Notes 2 and 18) 4,299,094 10,955,948 3,474,448 10,361,715
Accrued Taxes, Interest and Other Expenses (Note 19) 4,274,718 4,899,427 4,166,165 4,823,811
Subordinated Debt (Note 20) 8,416,424 8,389,297 8,416,424 8,389,297
Other Liabilities (Note 21) 13,673,717 12,802,426 11,960,255 11,081,837
TOTAL LIABILITIES 209,475,922 218,714,790 208,907,965 218,389,624
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY
Capital stock (Notes 2 and 22) P26,489,837 P22,929,837 P26,489,837 P22,929,837
Capital paid in excess of par value (Note 2) 2,037,272 545,745 2,037,272 545,745
Surplus reserves (Notes 2 and 27) 532,136 512,204 532,136 512,204
Deficit (Notes 2, 3 and 9) (1,547,162 ) (2,603,474 ) (3,079,723 ) (3,980,989 )
Revaluation increment on land and buildings (Notes 2 and 12) 2,471,113 2,471,113 2,471,113 2,471,113
Accumulated translation adjustment (Notes 2 and 13) (724,360 ) (114,869 ) – –
Net unrealized gain on available-for-sale investments (Note 11) 832,131 832,490 768,386 786,661
Share in equity adjustments of an associate (Note 13) 36,221 89,592 – –
Parent company shares held by a subsidiary (5,323 ) (5,323 ) – –
30,121,865 24,657,315 29,219,021 23,264,571
MINORITY INTEREST 107,253 98,960 – –
TOTAL EQUITY 30,229,118 24,756,275 29,219,021 23,264,571
TOTAL LIABILITIES AND EQUITY P239,705,040 P243,471,065 P238,126,986 P241,654,195

See accompanying Notes to Financial Statements.
 BREAKTHROUGH ON ALL FRONTS 37

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

STATEMENTS OF INCOME
(In Thousand Pesos, Except Earnings Per Share Amounts)

Consolidated Parent Company

Years Ended December 31
2007 2006 2005 2007 2006 2005
INTEREST INCOME ON
Loans and receivables (Notes 9 and 28) P6,190,951 P7,147,512 P6,340,391 P6,004,146 P6,962,022 P6,118,239
Investment securities (Note 11) 3,753,985 4,224,835 4,145,956 3,668,371 4,053,146 4,064,096
Deposits with banks and others 1,248,680 684,855 600,435 1,041,836 640,566 530,918
11,193,616 12,057,202 11,086,782 10,714,353 11,655,734 10,713,253
INTEREST EXPENSE ON
Deposit liabilities (Note 17) 3,886,846 5,158,476 4,728,664 3,883,661 5,259,545 4,789,760
Bills payable and other borrowings (Note 18) 1,429,173 1,554,215 1,124,366 1,389,540 1,505,089 1,097,448
5,316,019 6,712,691 5,853,030 5,273,201 6,764,634 5,887,208
NET INTEREST INCOME 5,877,597 5,344,511 5,233,752 5,441,152 4,891,100 4,826,045
Service fees and commission income (Note 26) 2,481,237 2,767,462 2,914,431 1,558,623 1,796,203 2,008,182
Service fees and commission expense 107,116 102,479 222,273 108,807 92,280 198,523
NET SERVICE FEES AND COMMISSION INCOME 2,374,121 2,664,983 2,692,158 1,449,816 1,703,923 1,809,659
Trading and investment securities gains -
net (Notes 8 and 11) 1,088,442 2,071,623 1,085,737 1,027,911 2,047,021 1,067,980
Foreign exchange gains - net 869,680 1,076,607 1,085,548 510,317 630,806 576,223
Miscellaneous (Notes 24 and 26) 4,308,021 2,153,786 1,328,321 4,294,522 2,250,650 1,148,531
TOTAL OPERATING INCOME 14,517,861 13,311,510 11,425,516 12,723,718 11,523,500 9,428,438
OTHER EXPENSES
Compensation and fringe benefits (Notes 23 and 28) 3,641,425 3,201,890 3,150,000 3,013,436 2,480,783 2,485,397
Provision for impairment and credit losses (Note 16) 3,280,875 2,802,283 504,213 3,251,687 2,734,736 502,855
Depreciation and amortization (Notes 12 and 14) 1,150,314 1,111,364 800,452 1,118,285 1,066,999 769,078
Taxes and licenses (Note 25) 953,079 1,123,155 1,001,462 923,946 1,099,523 973,867
Occupancy and equipment-related costs (Note 24) 807,233 832,172 857,259 644,706 672,435 699,450
Miscellaneous (Notes 25 and 26) 2,497,234 2,534,237 2,642,531 1,969,366 2,004,369 2,015,035
TOTAL OPERATING EXPENSES 12,330,160 11,605,101 8,955,917 10,921,426 10,058,845 7,445,682
INCOME BEFORE SHARE IN NET INCOME
OF AN ASSOCIATE AND INCOME TAX 2,187,701 1,706,409 2,469,599 1,802,292 1,464,655 1,982,756
SHARE IN NET INCOME (LOSS)
OF AN ASSOCIATE (Note 13) (79,739 ) 46,299 49,665 – – –
INCOME BEFORE INCOME TAX 2,107,962 1,752,708 2,519,264 1,802,292 1,464,655 1,982,756
PROVISION FOR INCOME TAX (Note 25) 609,512 932,679 1,891,726 467,181 758,874 1,731,778
NET INCOME P1,498,450 P820,029 P627,538 P1,335,111 P705,781 P250,978
ATTRIBUTABLE TO:
Equity Holders of the Parent Company (Note 31) P1,490,157 P814,435 P620,921
Minority Interest 8,293 5,594 6,617
P1,498,450 P820,029 P627,538
Basic/Diluted Earnings Per Share
Attributable to Equity Holders of the
Parent Company (Note 31) P2.43 P1.42 P1.08

See accompanying Notes to Financial Statements.
 38

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

STATEMENTS
(In Thousand Pesos)
OF CHANGES IN EQUITY

For the Year Ended December 31, 2007

Consolidated
Attributable to Equity Holders of the Parent Company
Revaluation Net Share in
Capital Paid Surplus Increment Accumulated Unrealized Equity Parent
Capital in Excess of Reserves Deficit on Land and Translation Gain on AFS Adjustments of Company
Stock (Notes 2 Par Value (Notes 2 (Notes 2, Buildings Adjustment Investments an Associate Shares held by Minority Total
and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Notes 2 and 13 ) (Note 11 ) (Note 13 ) a Subsidiary Total Interest Equity
Balance at January 1, 2007 P22,929,837 P545,745 P512,204 (P2,603,474 ) P2,471,113 (P114,869 ) P832,490 P89,592 (P5,323 ) P24,657,315 P98,960 P24,756,275
Issuance of common shares 3,560,000 1,691,000 – – – – – – – 5,251,000 – 5,251,000
Transaction costs related
to issuance of common shares – (199,473 ) – – – – – – – (199,473 ) – (199,473 )
P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Unrealized gain recognized

directly in equity – – – – – – 1,031,846 – – 1,031,846 – 1,031,846
Amounts realized in profit or loss – – – – – – (1,032,205 ) – – (1,032,205 ) – (1,032,205 )
Reduction in share in equity
adjustments of an associate – – – – – – – (53,371 ) – (53,371 ) – (53,371 )
Amortization of deferred losses (Note 9) – – – (413,913 ) – – – – – (413,913 ) – (413,913 )
Translation adjustment during the year – – – – – (609,491 ) – – – (609,491 ) – (609,491 )
Total income and expenses
recognized directly in equity – – – (413,913 ) – (609,491 ) (359 ) (53,371) – (1,077,134 ) (1,077,134 )
Net income for the year – – – 1,490,157 – – – – – 1,490,157 8,293 1,498,450
Total income and expenses for the year – – – 1,076,244 – (609,491 ) (359 ) (53,371) – 413,023 8,293 421,316
Transfer to surplus reserves – – 19,932 (19,932 ) – – – – – – – –
Balance at December 31, 2007 P26,489,837 P2,037,272 P532,136 (P1,547,162 ) P2,471,113 (P724,360 ) P832,131 P36,221 (P5,323 ) P30,121,865 P107,253 P30,229,118

Parent Company
Revaluation Net
Capital Paid Surplus Increment Unrealized
Capital Stock in Excess of Reserves Deficit on Land and Gain on AFS
(Notes 2 Par Value (Notes 2 (Notes 2, Buildings Investments Total
and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Note 11 ) Equity
Balance at January 1, 2007 P22,929,837 P545,745 P512,204 (P3,980,989 ) P2,471,113 P786,661 P23,264,571
Issuance of new common shares 3,560,000 1,691,000 – – – – 5,251,000
Transaction costs related to
issuance of common shares – (199,473 ) – – – – (199,473 )
Unrealized gain recognized
directly in equity – – – – – 1,013,505 1,013,505
Amounts realized in profit or loss – – – – – (1,031,780 ) (1,031,780 )
Amortization of deferred losses (Note 9) – – – (413,913 ) – – (413,913 )
Total income and expenses
recognized directly in equity – – – (413,913 ) – (18,275 ) (432,188 )
Net income for the year – – – 1,335,111 – – 1,335,111
Total income and expenses for the year – – – 921,198 – (18,275 ) 902,923
Transfer to surplus reserves (Note 27) – – 19,932 (19,932 ) – – –
Balance at December 31, 2007 P26,489,837 P2,037,272 P532,136 (P3,079,723 ) P2,471,113 P768,386 P29,219,021
PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

STATEMENTS
(In Thousand Pesos)
OF CHANGES IN EQUITY

For the Year Ended December 31, 2006

Consolidated
Attributable to Equity Holders of the Parent Company
Revaluation Net Share in
Capital Paid Surplus Increment Accumulated Unrealized Equity Parent
Capital in Excess of Reserves Deficit on Land and Translation Gain on AFS Adjustments of Company
Stock (Notes 2 Par Value (Notes 2 (Notes 2, Buildings Adjustment Investments an Associate Shares held by Minority Total
and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Notes 2 and 13 ) (Note 11 ) (Note 13 ) a Subsidiary Total Interest Equity
Balance at January 1, 2006 P22,929,837 P545,745 P495,118 (P3,657,870 ) P1,480,301 P217,479 P810,619 P– (P5,323 ) P22,815,906 P93,366 P22,909,272
Unrealized gain recognized
directly in equity – – – – – – 1,046,796 – – 1,046,796 – 1,046,796
Amounts realized in profit or loss – – – – – – (1,024,925 ) – – (1,024,925 ) – (1,024,925 )
Share in equity adjustments
of an associate – – – – – – – 89,592 89,592 89,592
Net addition to revaluation increment – – – – 990,812 – – – – 990,812 – 990,812
Amortization of deferred losses (Note 9) – – – (267,942 ) – – – – – (267,942 ) – (267,942 )
Reversal of other deferred credits and
unrealized profit on
assets sold (Note 9) – – – 524,989 – – – – – 524,989 – 524,989
Translation adjustment during the year – – – – – (332,348 ) – – – (332,348 ) – (332,348 )
Total income and expenses
recognized directly in equity – – – 257,047 990,812 (332,348 ) 21,871 89,592 – 1,026,974 – 1,026,974
Net income for the year – – – 814,435 – – – – – 814,435 5,594 820,029
Total income and expenses for the year – – 1,071,482 990,812 (332,348 ) 21,871 89,592 – 1,841,409 5,594 1,847,003
Transfer to surplus reserves (Note 27) – – 17,086 (17,086 ) – – – – – – – –
Balance at December 31, 2006 P22,929,837 P545,745 P512,204 (P2,603,474 ) P2,471,113 (P114,869 ) P832,490 P89,592 (P5,323 ) P24,657,315 P98,960 P24,756,275

Parent Company
Revaluation Net
Capital Paid Surplus Increment Unrealized
Capital Stock in Excess of Reserves Deficit on Land and Gain on AFS
(Notes 2 Par Value (Notes 2 (Notes 2, Buildings Investments Total
and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Note 11 ) Equity
Balance at January 1, 2006 P22,929,837 P545,745 P495,118 (P4,926,731 ) P1,480,301 P770,608 P21,294,878
Net movement in unrealized
gain on AFS investments – – – – – 1,040,529 1,040,529
Amounts realized in profit or loss – – – – – (1,024,476 ) (1,024,476 )
Amortization of deferred losses (Note 9) – – – (267,942 ) – – (267,942 )
Reversal of other deferred credits
and unrealized profit on
assets sold (Note 9) – – – 524,989 – – 524,989
Addition to revaluation increment – – – – 990,812 – 990,812
Total income and expenses
recognized directly in equity – – – 257,047 990,812 16,053 1,263,912
BREAKTHROUGH ON ALL FRONTS

Net income for the year – – – 705,781 – – 705,781

Total income and expenses for the year – – – 962,828 990,812 16,053 1,969,693
Transfer to surplus reserves (Note 27) – – 17,086 (17,086 ) – – –
39

Balance at December 31, 2006 P22,929,837 P545,745 P512,204 (P3,980,989 ) P2,471,113 P786,661 P23,264,571
 40

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

STATEMENTS
(In Thousand Pesos)
OF CHANGES IN EQUITY

For the Year Ended December 31, 2005

Consolidated
Attributable to Equity Holders of the Parent Company
Revaluation Net
Capital Paid Surplus Increment Accumulated Unrealized Parent
Capital in Excess of Reserves Deficit on Land and Translation Gain (Loss) on Company
Stock (Notes 2 Par Value (Notes 2 (Notes 2, Buildings Adjustment AFS Investments Shares held by Minority Total
and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Notes 2 and 13 ) (Note 11 ) a Subsidiary Total Interest Equity
Balance at January 1, 2005 P22,929,837 P545,745 P481,694 (P2,343,032 ) P1,443,486 P496,817 (P122,591 ) (P5,323 ) P23,426,633 P86,749 P23,513,382
Net movement in unrealized
gain on AFS investments – – – – – – 933,210 – 933,210 – 933,210
Net addition to revaluation increment – – – – 36,815 – – – 36,815 – 36,815
P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

Translation adjustment during the year – – – – – (279,338 ) – – (279,338 ) – (279,338 )

Valuation loss on special purpose vehicle
(SPV) subordinated notes (Note 9) – – – (1,868,299 ) – – – – (1,868,299 ) – (1,868,299 )
Amortization of deferred losses (Note 9) – – – (54,036 ) – – – – (54,036 ) – (54,036 )
Total income and expenses
recognized directly in equity – – – (1,922,335 ) 36,815 (279,338 ) 933,210 – (1,231,648 ) – (1,231,648 )
Net income for the year – – – 620,921 – – – – 620,921 6,617 627,538
Total income and expenses for the year – – – (1,301,414 ) 36,815 (279,338 ) 933,210 – (610,727 ) 6,617 (604,110 )
Transfer to surplus reserves (Note 27) – – 13,424 (13,424 ) – – – – – – –
Balance at December 31, 2005 P22,929,837 P545,745 P495,118 (P3,657,870 ) P1,480,301 P217,479 P810,619 (P5,323 ) P22,815,906 P93,366 P22,909,272

Parent Company
Revaluation Net
Capital Paid Surplus Increment Unrealized
Capital in Excess of Reserves Deficit on Land and Gain (Loss) on
Stock Par Value (Notes 2 (Notes 2, Buildings AFS Investments Total
(Notes 2 and 22 ) (Note 2 ) and 27 ) 3 and 9 ) (Notes 2 and 12 ) (Note 11 ) Equity
Balance at January 1, 2005 P22,929,837 P545,745 P481,694 (P3,241,950 ) P1,439,328 (P118,967 ) P22,035,687
Net movement in unrealized
gain on AFS investments – – – – – 889,575 889,575
Net addition to revaluation increment – – – – 40,973 – 40,973
Valuation loss on SPV
subordinated notes (Note 9) – – – (1,868,299 ) – – (1,868,299 )
Amortization of deferred losses (Note 9) – – – (54,036 ) – – (54,036 )
Total income and expenses
recognized directly in equity – – – (1,922,335 ) 40,973 889,575 (991,787 )
Net income for the year – – – 250,978 – – 250,978
Total income and expenses for the year – – – (1,671,351 ) 40,973 889,575 (740,809 )
Transfer to surplus reserves (Note 27) – – 13,424 (13,424 ) – – –
Balance at December 31, 2005 P22,929,837 P545,745 P495,118 (P4,926,731 ) P1,480,301 P770,608 P21,294,878

See accompanying Notes to Financial Statements.

 BREAKTHROUGH ON ALL FRONTS 41

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(In Thousand Pesos)

Consolidated Parent Company

Years Ended December 31
2007 2006 2005 2007 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P2,107,962 P1,752,708 P2,519,264 P1,802,292 P1,464,655 P1,982,756
Adjustments for:
Provision for impairment and credit losses (Note 16) 3,280,875 2,802,283 504,213 3,251,687 2,734,736 502,855
Depreciation and amortization (Notes 12 and 14) 1,150,314 1,111,364 800,452 1,118,285 1,066,999 769,078
Share in net loss (income) of an associate (Note 13) 79,739 (46,299 ) (49,665 ) – – –
Amortization of software cost 57,286 30,540 – 55,537 29,140 –
Amortization of premium (discount) (75,219 ) (13,205 ) – (20,964 ) 13,096 –
Realized trading gain on available-for-sale
(AFS) investments (1,032,205 ) (1,036,763 ) – (1,031,780 ) (1,024,476 ) –
Net gain on sale or exchange of investment
properties (Note 26) (3,410,352 ) (1,317,083 ) (372,542 ) (3,409,364 ) (1,317,083 ) (372,542 )
Changes in operating assets and liabilities:
Decrease (increase) in amounts of:
Financial assets at fair value
through profit or loss (Note 8) (2,077,400 ) 185,756 210,619 (2,084,949 ) 188,076 (584,984 )
Loans and receivables 4,991,986 (9,400,615 ) (5,594,019 ) 6,304,496 (9,295,614 ) (5,770,616 )
Other assets 537,610 (4,817,566 ) 4,652,339 417,015 (4,777,877 ) 5,422,119
Increase (decrease) in amounts of:
Deposit liabilities (Note 17) (2,855,723 ) 13,840,915 6,817,724 (2,842,291 ) 13,637,084 7,116,037
Accrued taxes, interest and other
expenses (Note 19) (671,058 ) 181,986 (1,404,823 ) (672,401 ) 233,195 (1,490,972 )
Other liabilities 269,439 1,138,920 2,088,545 878,418 785,851 2,396,976
Net cash generated from operations 2,353,254 4,412,941 10,172,107 3,765,981 3,737,782 9,970,707
Income taxes paid (547,457 ) (949,905 ) (1,860,334 ) (465,110 ) (772,981 ) (1,693,840 )
Dividends received (Note 13) 3,605 9,012 9,212 – 7,147 9,212
Net cash provided by operating activities 1,809,402 3,472,048 8,320,985 3,300,871 2,971,948 8,286,079
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of:
AFS investments 146,371,960 147,467,060 – 146,215,730 145,161,445 –
Investment properties 2,399,763 6,316,502 2,123,987 2,397,286 6,315,196 2,022,742
Property and equipment 217,196 339,912 – 216,345 333,833 –
Collection of interbank loans receivables (Note 33) 3,151,961 420,276,297 2,346,334 3,151,961 420,276,297 2,346,334
Proceeds from maturity of held-to-maturity investments – 3,763,003 8,670,327 – 3,658,545 6,697,986
Placements with the Bangko Sentral ng Pilipinas (BSP) (12,700,000 ) – – (12,700,000 ) – –
Acquisition of:
AFS investments (146,303,119 ) (149,101,658 ) (11,193,332 ) (147,422,095 ) (146,971,081 ) (9,033,469 )
Held-to-maturity investments (54,942 ) (37,350 ) – – – –
Property and equipment (Note 12) (547,187 ) (518,174 ) (515,890 ) (473,370 ) (496,642 ) (472,812 )
Software cost (Note 15) (249,146 ) (54,285 ) – (249,146 ) (54,285 ) –
Additional interbank loans receivables (Note 33) – (423,428,258 ) – – (423,428,258 ) –
Additional investments in subsidiaries – – – – (40,498 ) –
Net cash provided by (used in) investing activities (7,713,514 ) 5,023,049 1,431,426 (8,863,289 ) 4,754,552 1,560,781
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Bills and acceptances payable (Note 18) 556,934 12,356,184 – 556,934 11,381,465 –
Subordinated debt (Note 20) – 5,500,000 – – 5,500,000 –
Issuance of common shares (Note 22) 5,051,527 – – 5,051,527 – –
Settlement of bills and acceptances payable (Note 2) (7,213,788 ) (14,546,110 ) (388,784 ) (7,444,201 ) (13,463,033 ) (452,190 )
Net cash provided by (used in) financing activities (1,605,327 ) 3,310,074 (388,784 ) (1,835,740 ) 3,418,432 (452,190 )
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,509,439 ) 11,805,171 9,363,627 (7,398,158 ) 11,144,932 9,394,670
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Cash and other cash items 4,820,155 5,670,002 3,342,672 4,753,539 5,333,783 3,342,466
Due from BSP 12,566,759 3,719,362 3,765,737 12,566,759 3,719,362 3,765,737
Due from other banks 3,555,603 5,494,793 7,051,470 2,314,288 4,897,004 6,092,449
Interbank loans receivable (Note 33) 19,260,856 16,914,045 16,574,696 18,941,576 16,881,081 16,535,908
Securities held under agreements to resell 15,700,000 12,300,000 4,000,000 15,700,000 12,300,000 4,000,000
55,903,373 44,098,202 34,734,575 54,276,162 43,131,230 33,736,560
CASH AND CASH EQUIVALENTS AT END OF YEAR
Cash and other cash items 4,773,212 4,820,155 5,670,002 4,732,004 4,753,539 5,333,783
Due from BSP 15,261,521 12,566,759 3,719,362 15,261,521 12,566,759 3,719,362
Due from other banks 3,962,000 3,555,603 5,494,793 2,859,908 2,314,288 4,897,004
Interbank loans receivable (Note 33) 13,197,201 19,260,856 16,914,045 12,824,611 18,941,576 16,881,081
Securities held under agreements to resell 11,200,000 15,700,000 12,300,000 11,200,000 15,700,000 12,300,000
P48,393,934 P55,903,373 P44,098,202 P46,878,044 P54,276,162 P43,131,230
OPERATIONAL CASH FLOWS FROM
INTEREST AND DIVIDENDS
Interest paid P5,837,700 P7,109,859 P7,116,769 P5,806,509 P7,148,539 P7,159,482
Interest received 11,187,821 12,118,812 11,954,116 10,206,429 11,705,491 11,592,474
Dividends received 3,605 9,012 9,212 20,532 191,949 18,203

See accompanying Notes to Financial Statements.
42 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Philippine National Bank (the Parent Company) was established in 1916 and started commercial operations that same year. Its principal place
of business is at PNB Financial Center, President Diosdado Macapagal Boulevard, Pasay City. In August 2007, the Parent Company completed
its Tier 1 follow-on equity offering where it raised P5.1 billion in Tier 1 capital, net of issuance cost of P199.5 million. Together with the sale
of 89 million primary shares, the 71.8 million secondary shares owned by the National Government (NG) thru Philippine Deposit Insurance
Corporation (PDIC) and Department of Finance (DOF) were sold to the public and thus paving for a complete exit of the NG from the Parent
Company. As of December 31, 2007, the companies and persons affiliated/associated with the Lucio Tan Group (LTG) remain the majority
shareholder of the Parent Company at 69.87% and the remaining 30.13% is held by the public. As of December 31, 2006, the Parent
Company’s shares were held 77.43% by the companies and persons affiliated/associated with the LTG, 12.53% by the NG and the remaining
10.04% by the public.

The Parent Company provides a full range of banking and other financial services to corporate, middle-market and retail customers, the NG,
local government units (LGUs) and government-owned and controlled corporations (GOCCs) and various government agencies. The Parent
Company’s principal commercial banking activities include deposit-taking, lending, bills discounting, foreign exchange dealing, investment
banking, fund transfers/remittance servicing and a full range of retail banking and trust services through its 324 domestic and 32 overseas
branches and offices in 2007 and 324 domestic and 33 overseas branches and offices in 2006. The Parent Company’s international subsidiaries
have a network of 73 and 69 offices in 2007 and 2006, respectively, in key cities of the United States of America (USA), Canada, Western
Europe, Middle East and Asia.

The subsidiaries are engaged in a number of diversified financial and related businesses such as remittance and cargo servicing, non-life
insurance, merchant banking, leasing, stock brokerage, foreign exchange trading and/or related services while an associate is engaged in the
life-insurance business.

The accompanying financial statements of the Parent Company and its subsidiaries (the Group) and of the Parent Company were authorized
for issue by the Parent Company’s board of directors (BOD) on March 28, 2008.

2. Restructuring and Rehabilitation

The Parent Company previously operated under a rehabilitation program pursuant to the Memorandum of Agreement (MOA) signed by the
Republic of the Philippines, the PDIC and the LTG on May 3, 2002.

Pursuant to the MOA, the following measures were implemented:

(1) Capital Restructuring

The Parent Company instituted a capital reduction exercise as of December 31, 2001, reducing the par value of its common shares from
P60 per share to P40 per share, resulting in a total capital reduction of P7.6 billion. This resulted in a decrease in the authorized capital
stock of the Parent Company from P50.0 billion divided into 833,333,334 common shares to P33.3 billion divided into 833,333,334
common shares. The reduction in par value and the amendment to the articles of incorporation of the Parent Company were approved
by the BOD of the Parent Company on May 17, 2002 and by the Philippine Securities and Exchange Commission (SEC) on July 23, 2002.

i. On May 16, 2002, the Bangko Sentral ng Pilipinas (BSP) approved the following: (a) booking of an appraisal increment of
P431.8 million for the year ended December 31, 2001 on properties and recognition of the same for the purpose of determiningthe
Parent Company’s capital adequacy ratio; and (b) booking of translation adjustment of P1.6 billion for the year ended December
31, 2001 representing the increase in peso value of the Parent Company’s investment in foreign subsidiaries, for the purpose of
the Rehabilitation Plan and as an exception to existing BSP regulations, provided that the same should be excluded for dividend
distribution purposes.

ii. The translation adjustment of P1.6 billion was applied to eliminate the Parent Company’s remaining deficit of P1.3 billion as of
December 31, 2001, after applying the total reduction in par value amounting to P7.6 billion as a result of the capital reduction
exercise. This corporate act was approved by the SEC on November 7, 2002, subject to the following conditions: (a) the remaining
translation adjustment of P310.7 million as of December 31, 2001 (shown in the balance sheet as part of Capital paid in excess of par
value) would not, without the prior approval of the SEC, be used for or applied towards any provisions for losses that may be incurred
in the future; and (b) for purposes of declaration of dividends, any future surplus account of the Parent Company should be restricted
to the extent of the deficit wiped out by the translation adjustment.

The foregoing capital restructuring measures were aimed at reducing the deficit in the equity of the Parent Company which amounted
to P8.9 billion as of December 31, 2001.
 BREAKTHROUGH ON ALL FRONTS 43

The Parent Company’s deficit before and after the quasi-reorganization follows (in thousand pesos):

Deficit before the quasi-reorganization (balance at December 31, 2001) P8,877,094

Reduction in par value during the year (7,561,409 )
Application of translation adjustment to deficit on quasi-reorganization (1,626,430 )
Deficit after the quasi-reorganization (310,745 )
Transfer to capital paid in excess of par value P310,745

(2) Debt-to-Equity Conversion

In 2002, convertible preferred shares were issued to the PDIC as payment for the P7.8 billion borrowed by the Parent Company from the
PDIC. This increased (i) the authorized capital stock of the Parent Company to P50.0 billion consisting of 1,054,824,557 common shares
with a par value of P40 each and 195,175,444 convertible preferred shares with a par value of P40 each and (ii) the issued capital stock of
the Parent Company to P22.9 billion consisting of 378,070,472 common shares with a par value of P40 each and 195,175,444 convertible
preferred shares with a par value of P40 each.

(3) Assignment of Certain Government Accounts to the PDIC

On July 30, 2002, the Parent Company and the PDIC signed an agreement whereby the Parent Company transferred and conveyed by
way of “dacion en pago”, or payment in kind, its rights and interests to the loans of the NG, certain LGUs, certain GOCCs and various
government agencies and certain debt securities issued by various government entities (the Government accounts), to the PDIC. The
“dacion en pago” arrangement reduced the Parent Company’s outstanding obligations arising from the financial assistance given to the
Parent Company by the BSP and the PDIC. The accrual of interest incurred by the Parent Company on the government accounts and on
the P10.0 billion payable to the PDIC ceased on October 1, 2001.

After the completion of the corporate actions and rehabilitation set out above (especially, the conversion of debt to equity and the “dacion
en pago” arrangement), the balance of the Parent Company’s outstanding obligations to the PDIC was P6.1 billion as of December 31, 2002.
This balance was restructured into a term loan of 10 years, with interest payable at 91-day treasury bill (T-bill) rate plus 1.00% (see Note 18).
On June 19, 2007, the Parent Company fully paid the PDIC loan of P6.1 billion.

In line with the rehabilitation program of the Parent Company as approved under Monetary Board (MB) Resolution No. 626 dated
April 30, 2003, the Parent Company and the BSP entered into a Memorandum of Understanding (MOU) on September 16, 2003. Pursuant
to the MOU, the Parent Company should comply to the full extent of its capability, with the following directives of MB Resolution No. 649,
among others:

(1) Maintain a strong management team supported by competent staff;

(2) Improve the Parent Company’s past due ratio;
(3) Sell the PNB Financial Center;
(4) Dispose real and other properties owned or acquired - ROPA (included under investment properties); and
(5) Comply with certain prescribed limits.

In May 2007, the Parent Company’s rehabilitation program ended and the MOU with the BSP has expired. As agreed with BSP, the Parent
Company’s BOD will implement the following:

(1) a Tier 1 capital restoration plan which should call for a short-term capital injection within one year and a second capital injection, if
necessary, within three to five years;

(2) a plan to strengthen the quantity and quality of supervision by the BOD which include, at a minimum, actions to be taken to strengthen
the functions of the Corporate Governance Committee, establish an effective internal audit function and an effective compliance system;
and

(3) a plan to improve the Parent Company’s operation and strengthen the risk management process and a new Financial Plan which will cover,
at a minimum, a plan to return the Parent Company to financial health, establishment of an effective system of ROPA administration,
improvement in risk management processes, Information Technology Group and Trust Banking Group function.

As discussed in Notes 1 and 22, the Parent Company completed its Tier 1 follow-on equity offering in August 2007 raising about P5.3 billion
in Tier 1 capital.
44 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

3. Summary of Significant Accounting Policies

Basis of Preparation
The accompanying financial statements have been prepared on a historical cost basis except for financial assets at fair value through profit or
loss (FVPL) including derivative financial instruments, available-for-sale (AFS) investments, land and building that have been measured at fair
value. The financial statements are presented in Philippine pesos, the Parent Company’s functional and presentation currency, and all values
are rounded to the nearest thousand pesos (P000) except when otherwise indicated.

The financial statements of the Parent Company reflect the accounts maintained in the Regular Banking Unit (RBU) and Foreign Currency
Deposit Unit (FCDU). For financial reporting purposes, FCDU accounts and foreign currency-denominated accounts in the RBU are translated
into their equivalents in Philippine pesos (see policy on Foreign Currency Translation). The financial statements individually prepared for these
units are combined and inter-unit accounts are eliminated.

Statement of Compliance
The financial statements of the Group and the Parent Company have been prepared in compliance with Philippine Financial Reporting Standards
(PFRS), except for the deferral of losses on sale of nonperforming assets (NPAs) to special purpose vehicles (SPVs) as discussed in Note 9, non-
recognition of allowance for impairment losses as of December 31, 2006 on loans sold to SPV in 2007 and the non-consolidation of the SPV
that acquired the NPAs sold in 2007 and 2006 as discussed in Note 10 as allowed by the regulatory accounting policies prescribed by the BSP
for banks and financial institutions availing of the provisions of Republic Act (RA) No. 9182, The Special Purpose Vehicle Act of 2002.

Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and the following wholly owned and majority
owned subsidiaries:

Effective
Country of Percentage
Subsidiary Industry Incorporation of Ownership
PNB Capital and Investment Corporation (PNB Capital) Financial Markets Philippines 100.00
PNB Forex, Inc. - do - - do - 100.00
PNB Holdings Corporation (PNB Holdings) - do - - do - 100.00
PNB Securities, Inc. (PNB Securities) Securities Brokerage - do - 100.00
PNB Corporation - Guam Financial Markets Guam 100.00
PNB International Investments Corporation (PNBIIC) - do - USA 100.00
PNB Europe PLC - do - United Kingdom 100.00
PNB International Finance Limited (PNB IFL) - do - Hong Kong 100.00
PNB Global Filipino Remittance Spain (PNB GFRS) - do - Spain 100.00
PNB Austria Financial Services GmbH (PNB Austria) - do - Austria 100.00
PNB Italy SpA - do - Italy 100.00
PNB Remittance Center, Ltd. Services Hong Kong 100.00
Tanzanite Investments (SPV-AMC), Inc. Others Philippines 100.00
Tau Portfolio Investments (SPV-AMC), Inc. - do - - do - 100.00
Omicron Asset Portfolio (SPV-AMC), Inc. - do - - do - 100.00
Japan - PNB Leasing and Finance Corporation (Japan-PNB Leasing) Financial Markets - do - 60.00

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company using consistent accounting
policies. All significant intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions
are eliminated in full in the consolidation.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Control is achieved where the Group has the
power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Consolidation of subsidiaries ceases
when control is transferred out of the Group or Parent Company. The results of subsidiaries acquired or disposed of during the period are
included in the consolidated statement of income from the date of acquisition or up to the date of disposal, as appropriate.

In 2006, the Parent Company sold Opal Portfolio Investments (SPV-AMC), Inc. (OPII) and certain NPAs to Golden Dragon Star Equities, Inc. under
a transaction that qualified, and was approved by the BSP, as a legal true sale (see Note 10). OPII holds the NPA sold by the Parent Company.
Under Standing Interpretations Committee (SIC) No. 12, Consolidation of Special Purpose Entity, the consolidated financial statements should
include the accounts of OPII. However, the accounts of OPII were not consolidated into the accompanying financial statements as of and for
the years ended December 31, 2007 and 2006.
 BREAKTHROUGH ON ALL FRONTS 45

Minority Interests
Minority interests represent the portion of profit or loss and the net assets not held by the Group and are presented separately in the
consolidated statement of income and within equity in the consolidated balance sheet, separately from equity attributable to the Parent
Company. Acquisitions of minority interests are accounted for using the entity concept method, whereby the difference between the
consideration and the book value of the share of the net assets acquired is recognized as an equity transaction.

Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial years except as follows:

The Group has adopted the following PFRS and Philippine Interpretation which became effective beginning January 1, 2007.

PFRS 7, Financial Instruments: Disclosures, and complementary amendment to Philippine Accounting Standard (PAS) 1, Presentation of Financial
Statements: Capital Disclosures
PFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk,
liquidity risk and market risk, as well as sensitivity analysis to market risk. It replaces PAS 30, Disclosures in the Financial Statements of Banks
and Similar Financial Institutions, and the disclosure requirements in PAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to
all entities that report under PFRS. Adoption of this standard resulted in the inclusion of additional disclosures such as market risk, sensitivity
analysis, contractual maturity analysis of financial liabilities for liquidity risk and aging analysis on financial assets that are either past due or
impaired. The amendment to PAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. The required new
disclosures are reflected in the financial statements of the Group, where applicable.

In December 2007, the Financial Reporting Standards Council has approved an amendment to the transition provision of PFRS 7 that gives
transitional relief with respect to the presentation of comparative information for the new risk disclosures about the nature and extent of
risks arising from financial instruments under paragraphs 31 to 42 of PFRS 7. In relation to such relief, the Group is allowed not to present
comparative information for the new risk disclosures under paragraphs 31 to 42 of PFRS 7 unless the disclosure was previously required under
PAS 30 or PAS 32.

Philippine Interpretation IFRIC 8, Scope PFRS 2

This Interpretation requires PFRS 2 to be applied to any arrangements where equity instruments are issued for consideration which appears to
be less than fair value. The Interpretation has no impact on the financial statements of the Group.

Philippine Interpretation IFRIC 10, Interim Financial Reporting and Impairment

This Interpretation prohibits the reversal of impairment losses on goodwill and AFS equity investments recognized in the interim financial
reports even if impairment is no longer present at the annual balance sheet date. This Interpretation has no significant impact on the financial
statements of the Group.

Foreign Currency Translation

Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured
using that functional currency.

Transactions and balances

The books of accounts of the RBU are maintained in Philippine pesos, while those of the FCDU are maintained in United States (US) dollars.
For financial reporting purposes, the monetary assets and liabilities of the FCDU and the foreign currency-denominated monetary assets and
liabilities in the RBU are translated in Philippine pesos based on the Philippine Dealing System (PDS) closing rate prevailing at end of the year
and for foreign currency-denominated income and expenses, at the PDS weighted average rate (PDSWAR) for the year. Foreign exchange
differences arising from restatements of foreign currency-denominated assets and liabilities are credited to or charged against operations in the
year in which the rates change. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined.

Group companies
As at the reporting date, the assets and liabilities of overseas subsidiaries are translated into the Parent Company’s presentation currency (the
Philippine peso) at the rate of exchange ruling at the balance sheet date, and their income and expenses are translated at the weighted average
exchange rates for the year. Exchange differences arising on translation are taken directly to a separate component of equity in the consolidated
balance sheet. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to the particular foreign operation
is recognized in the consolidated statement of income.
46 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of recognition
Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the
marketplace are recognized on settlement date. Derivatives are recognized on trade date basis (i.e., the date that the Group commits to
purchase or sell). Deposits, amounts due to banks and customers and loans are recognized when cash is received by the Group or advanced
to the borrowers. For PNB Securities, securities transactions are recorded on a trade date basis.

Initial recognition of financial instruments

All financial assets are initially recognized at fair value. Except for financial assets at FVPL, the initial measurement of financial assets and
liabilities includes transaction costs. The Group classifies its financial assets in the following categories: financial assets at FVPL, held-to-
maturity (HTM) investments, AFS investments, and loans and receivables. Financial liabilities are classified into financial liabilities at FVPL and
other financial liabilities (at amortized cost). The classification depends on the purpose for which the investments were acquired and whether
they are quoted in an active market. Management determines the classification of its investments at initial recognition and, where allowed
and appropriate, re-evaluates such designation at every reporting date.

Determination of fair value

The fair value for financial instruments traded in active markets at the balance sheet date is based on their quoted market price or dealer price
quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. When current bid and
asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not
been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate valuation methodologies.
Valuation methodologies include net present value techniques, comparison to similar instruments for which market observable prices exist,
option pricing models, and other relevant valuation models.

‘Day 1’ profit
Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ profit) in the statement of income in ‘Trading and investment securities gains - net’. In
cases where data is not observable, the difference between the transaction price and model value is only recognized in the statement of income
when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate
method of recognizing the ‘Day 1’ profit amount.

Derivatives recorded at FVPL

The Parent Company and some of its subsidiaries are counterparties to derivative contracts, such as currency forwards, currency swaps, and
interest rate swaps. These derivatives are entered into as a service to customers and as a means of reducing or managing their respective
foreign exchange and interest rate exposures, as well as for trading purposes. Such derivative financial instruments are initially recorded at fair
value on the date at which the derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising
from changes in fair values of derivatives (except those accounted for as accounting hedges) are taken directly to the statement of income and
are included in ‘Trading and investment securities gains - net’. Derivatives are carried as assets when the fair value is positive and as liabilities
when the fair value is negative.

For the purpose of hedge accounting, hedges are classified primarily as either: a) a hedge of the fair value of an asset, liability or a firm
commitment (fair value hedge); or b) a hedge of the exposure to variability in cash flows attributable to an asset or liability or a forecasted
transaction (cash flow hedge). In 2007 and 2006, the Group did not apply hedge accounting treatment for its derivatives transactions.

The Group has certain derivatives that are embedded in host financial (such as structured notes, debt investments, and loan receivables) and
non-financial (such as purchase orders and service agreements) contracts. These embedded derivatives include credit default swaps (which
are linked either to a single reference entity or a basket of reference entities; conversion options in loans receivable; call options in certain
long-term debt, and foreign-currency derivatives in debt instruments, purchase orders and service agreements. Embedded derivatives are
bifurcated from their host contracts and carried at fair value with fair value changes being reported through profit or loss, when the entire
hybrid contracts (composed of both the host contract and the embedded derivative) are not accounted for as financial assets at FVPL, and when
their economic risks and characteristics are not closely related to those of their respective host contracts, and when a separate instrument with
the same terms as the embedded derivative would meet the definition of a derivative. The Group assesses whether embedded derivatives
are required to be separated from the host contracts when the Group first becomes a party to the contract. Reassessment of embedded
derivatives is only done when there are changes in the contract that significantly modifies the contractual cash flows.
 BREAKTHROUGH ON ALL FRONTS 47

Other financial assets or financial liabilities held for trading

Other financial assets or financial liabilities held for trading (classified as ‘Financial assets at FVPL’ or ‘Financial liabilities at FVPL’) are recorded
in the balance sheet at fair value. Changes in fair value relating to the held-for-trading positions are recognized in ‘Trading and investment
securities gains - net’. Interest earned or incurred is recorded in interest income or expense, respectively, while dividend income is recorded in
‘Miscellaneous income’ when the right to receive payment has been established.

Included in this classification are debt and equity securities which have been acquired principally for the purpose of selling or repurchasing in
the near term.

Designated financial assets or financial liabilities at FVPL

Financial assets or financial liabilities classified in this category are designated by management on initial recognition when any of the following
criteria are met:

• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or
liabilities or recognizing gains or losses on them on a different basis; or
• The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance
evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or
• The financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows
or it is clear, with little or no analysis, that it would not be separately recorded.

Designated financial assets and financial liabilities at FVPL are recorded in the balance sheet at fair value. Changes in fair value are recorded in
‘Trading and investment securities gains - net’. Interest earned or incurred is recorded in interest income or expense, respectively, while dividend
income is recorded in ‘Miscellaneous income’ according to the terms of the contract, or when the right of payment has been established.

HTM investments
HTM investments are quoted non-derivative financial assets with fixed or determinable payments and fixed maturities for which the Group’s
management has the positive intention and ability to hold to maturity. Where the Group sells other than an insignificant amount of HTM
investments, the entire category would be tainted and reclassified as AFS investments. After initial measurement, these HTM investments are
subsequently measured at amortized cost using the effective interest method, less impairment in value. Amortized cost is calculated by taking
into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortization is included
in ‘Interest income’ in the statement of income. Gains and losses are recognized in income when the HTM investments are derecognized and
impaired, as well as through the amortization process. The losses arising from impairment of such investments are recognized in the statement
of income under ‘Provision for impairment and credit losses’. The effects of restatement on foreign currency-denominated HTM investments
are recognized in the statement of income.

Loans and receivables, amounts due from BSP and other banks, and interbank loans receivable
Classified as loans and receivables are ‘Due from BSP’, ‘Due from other banks’, ‘Interbank loans receivable’, and ‘Loans and receivables’. These
are financial assets with fixed or determinable payments and fixed maturities and are not quoted in an active market. They are not entered
into with the intention of immediate or short-term resale and are not classified as Financial assets at FVPL or designated as AFS investments.

Loans and receivables also include receivables arising from transactions on credit cards issued directly by the Parent Company. Furthermore,
‘Loans and receivables’ include the aggregate rental on finance lease transactions. Unearned income on finance lease transactions is shown
as a deduction from ‘Loans and receivables’ (included in ‘Unearned discounts’).

After initial measurement, the ‘Loans and receivables’, ‘Due from BSP’, ‘Due from other banks’ and ‘Interbank loans receivable’ are subsequently
measured at amortized cost using the effective interest method, less allowance for credit losses. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amortization is included
in the ‘Interest income’ in the statement of income. The losses arising from impairment are recognized in ‘Provision for impairment and credit
losses’ in the statement of income.

AFS investments
AFS investments are those which are designated as such or do not qualify to be classified as ‘Financial assets at FVPL’, ‘HTM investments’ or
‘Loans and receivables’. They are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market
conditions. They include debt and equity instruments.

After initial measurement, AFS investments are subsequently measured at fair value. The effective yield component of AFS debt securities,
as well as the impact of restatement on foreign currency-denominated AFS debt securities, is reported as income. The unrealized gains and
losses arising from the fair valuation of AFS investments are excluded, net of tax, from reported income and are reported as ‘Net unrealized
gain on AFS investments’ in the equity section of the balance sheet.
48 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

When the security is disposed of, the cumulative gain or loss previously recognized in equity is recognized as ‘Trading and investment securities
gains - net’ in the statement of income. Interest earned on holding AFS investments are reported as ‘Interest income’ using the effective
interest rate. Dividends earned on holding AFS investments are recognized in the statement of income as ‘Miscellaneous income’ when the
right of the payment has been established. The losses arising from impairment of such investments are recognized as ‘Provision for impairment
and credit losses’ in the statement of income.

Bills payable and other borrowed funds

Issued financial instruments or their components, which are not designated at FVPL, are classified as bills payable or other appropriate account
titles for such borrowed funds, where the substance of the contractual arrangement results in the Group having an obligation either to deliver
cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of own equity shares. The components of issued financial instruments that contain both liability and equity
elements are accounted for separately, with the equity component being assigned the residual amount after deducting from the instrument as
a whole the amount separately determined as the fair value of the liability component on the date of issue.

After initial measurement, bills payable and other borrowings are subsequently measured at amortized cost using the effective interest rate
method. Amortized cost is calculated by taking into account any discount or premium on the issue and fees that are an integral part of the
effective interest rate.

Derecognition of Financial Assets and Liabilities

Financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized when:

• the rights to receive cash flows from the asset have expired;
• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay
to a third party under a “pass-through” arrangement; or
• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards
of the asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has transferred control over the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control over the asset, the asset is recognized to the
extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.

Financial liability
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognized in the statement of income.

Repurchase and Reverse Repurchase Agreements

Securities sold under agreements to repurchase at a specified future date (‘repos’) are not derecognized from the balance sheet. The
corresponding cash received, including accrued interest, is recognized in the balance sheet as a loan to the Group, reflecting the economic
substance of such transaction.

Conversely, securities purchased under agreements to resell at a specified future date (‘reverse repos’) are not recognized in the balance sheet.
The corresponding cash paid, including accrued interest, is recognized on the balance sheet as ‘Securities held under agreements to resell’,
and is considered a loan to the counterparty. The difference between the purchase price and resale price is treated as interest income and is
accrued over the life of the agreement using the effective interest method.

Impairment of Financial Assets

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or
events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and
where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
 BREAKTHROUGH ON ALL FRONTS 49

Loans and receivables, amounts due from BSP and other banks, and interbank loans receivable
For loans and receivables, due from BSP and other banks, and interbank loans receivable carried at amortized cost, the Group first assesses
whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial
assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for individually assessed
financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively
assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative
of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually
assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for
impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred).
The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to the statement of
income. Interest income continues to be recognized based on the original effective interest rate of the asset. Loans, together with the
associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If
subsequently, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized,
the previously recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts
formerly charged are credited to the ‘Provision for impairment and credit losses’ account.

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate, adjusted for the original credit risk
premium. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that
may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry,
collateral type, past-due status and term. Future cash flows in a group of financial assets that are collectively evaluated for impairment are
estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss
experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the year on which
the historical loss experience is based and to remove the effects of conditions in the historical year that do not exist currently. Estimates of
changes in future cash flows reflect, and are directionally consistent with changes in related observable data from year to year (such changes
in property prices, payment status, or other factors that are indicative of incurred losses in the Group and their magnitude). The methodology
and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates
and actual loss experience.

Restructured loans
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment
arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, the loan is no longer considered past
due. Management continuously reviews restructured loans to ensure that all criteria are met and that future payments are likely to occur. The
loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate.
The difference between the recorded value of the original loan and the present value of the restructured cash flows, discounted at the original
effective interest rate, is recognized in ‘Provision for impairment and credit losses’ in the statement of income.

AFS investments
For AFS investments, the Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of
financial assets is impaired.

In case of equity investments classified as AFS investments, this would include a significant or prolonged decline in the fair value of the
investments below its cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of income - is removed
from equity and recognized in the statement of income. Impairment losses on equity investments are not reversed through the statement of
income. Increases in fair value after impairment are recognized directly in equity.

In the case of debt instruments classified as AFS investments, impairment is assessed based on the same criteria as financial assets carried
at amortized cost. Interest continues to be accrued at the original effective interest rate on the reduced carrying amount of the asset and is
recorded as part of ‘Interest income’ in the statement of income. If subsequently, the fair value of a debt instrument increased and the increase
can be objectively related to an event occurring after the impairment loss was recognized in the statement of income, the impairment loss is
reversed through the statement of income.
50 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

HTM investments
For HTM investments, the Group assesses whether there is objective evidence of impairment. If there is objective evidence that an impairment
loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is
reduced through use of an allowance account and the amount of loss is charged against the statement of income. Interest income continues
to be recognized based on the original effective interest rate of the asset.

If subsequently, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized,
any amount formerly charged are credited to the ‘Provision for impairment and credit losses’ in the statement of income and the allowance
account reduced. The HTM investments, together with the associated allowance accounts, are written off when there is no realistic prospect
of future recovery and all collateral has been realized.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable
legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the
balance sheet.

Terminal Value of Leased Assets and Deposits on Finance Leases

The terminal value of leased assets, which approximates the amount of guaranty deposit paid by the lessee at the inception of the lease, is the
estimated proceeds from the sale of the leased asset at the end of the lease term. At the end of the lease term, the terminal value of the leased
asset is generally applied against the guaranty deposit of the lessee when the lessee decides to buy the leased asset.

Financial Guarantees
In the ordinary course of business, the Group gives financial guarantees consisting of letters of credit, letters of guarantees, and acceptances.
Financial guarantees are initially recognized in the financial statements at fair value under ‘Other liabilities’. Subsequent to initial recognition,
the Group’s liabilities under such guarantees are each measured at the higher of the initial fair value less, when appropriate, cumulative
amortization calculated to recognize the fee in the statement of income in ‘Service fees and commission income’, over the term of the
guarantee, and the best estimate of the expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is taken to the statement of income in ‘Provision for impairment and credit losses’.
Any financial guarantee liability remaining is recognized in the statement of income in ‘Service fees and commission income’, when the
guarantee is discharged, cancelled or expires.

Revenue Recognition
Revenue is recognized to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured.
The following specific recognition criteria must also be met before revenue is recognized:

Interest income
For all financial instruments measured at amortized cost and interest bearing financial instruments classified as AFS investments, interest
income is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial
liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any
fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future
credit losses. The adjusted carrying amount is calculated based on the original effective interest rate. The change in carrying amount is
recorded as interest income.

Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income
continues to be recognized using the original effective interest rate applied to the new carrying amount.

Fee and commission income

The Group earns fee and commission income from diverse range of services it provides to its customers. Fee income can be divided into the
following two categories:

a) Fee income earned from services that are provided over a certain period of time
Fees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees,
custodian fees, fiduciary fees, commission income, credit related fees, asset management fees, portfolio and other management fees, and
advisory fees. However, loan commitment fees for loans that are likely to be drawn down are deferred (together with any incremental
costs) and recognized as an adjustment to the effective interest rate on the loan.
 BREAKTHROUGH ON ALL FRONTS 51

b) Fee income from providing transaction services

Fees arising from negotiating or participating in the negotiation of a transaction for a third party - such as the arrangement of the
acquisition of shares or other securities or the purchase or sale of businesses - are recognized on completion of the underlying transaction.
Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria. These fees
include underwriting fees, corporate finance fees, and brokerage fees. Loan syndication fees are recognized in the statement of income
when the syndication has been completed and the Group retains no part of the loans for itself or retains part at the same effective interest
rate as for the other participants.

Dividend income
Dividend income is recognized when the Group’s right to receive payment is established.

Trading and investment securities gains - net

Results arising from trading activities including all gains and losses from changes in fair value for financial assets and financial liabilities at
FVPL.

Rental income
Rental income arising on leased properties is accounted for on a straight-line basis over the lease terms on ongoing leases and is recorded in
the statement of income under ‘Miscellaneous income’.

Commissions earned on credit cards

Commissions earned are taken up as income upon receipt from member establishments of charges arising from credit availments by credit
cardholders. These commissions are computed based on certain agreed rates and are deducted from amounts remittable to member
establishments.

Purchases by the credit cardholders, collectible on installment basis, are recorded at the cost of the items purchased plus certain percentage
of cost. The excess over cost is credited to ‘Unearned discounts’ account and is shown as a deduction from ‘Loans and receivables’ in the
consolidated balance sheet. The unearned discount is taken up to income over the installment terms and is computed using the effective
interest method.

Income on direct financing leases and receivables financed

Income of Japan-PNB Leasing on loans and receivables financed with short-term maturities is recognized using the effective interest method.

Interest and finance fees on finance leases and loans and receivables financed with long-term maturities and the excess of the aggregate lease
rentals plus the estimated terminal value of the leased equipment over its cost are credited to unearned discounts and amortized over the term
of the note or lease using the effective interest method.

Other Income
Income from sale of services is recognized upon rendition of the service. Income from sale of properties is recognized upon completion of the
earning process and the collectibility of the sales price is reasonably assured.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and other cash items (COCI), amounts due from BSP and other
banks and interbank loans receivable and securities held under agreements to resell that are convertible to known amounts of cash, with
original maturities of three months or less from dates of placements and that are subject to an insignificant risk of changes in fair value.

Receivables from SPV

Receivables from SPV are stated at the face value of the related note reduced by an allowance for credit losses. The allowance for credit losses
is determined based on the difference between the outstanding principal amount and the recoverable amount which is the present value of
the future cash flow expected to be received in payment of the receivable.

Investments in Subsidiaries and an Associate

Investments in subsidiaries
Subsidiaries pertain to entities over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity (see Basis of Consolidation).

Investment in an associate
Associate pertains to an entity over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20.00% and 50.00% of the voting rights. In the consolidated financial statements, investment in an associate is accounted for under
the equity method of accounting.
52 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Under the equity method, investment in an associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of
the net assets of the associate. The Group’s share of its associates’ post-acquisition profits or losses is recognized in the statement of income,
and its share of post-acquisition movements in the associates’ equity reserves is recognized directly in equity. When the Group’s share of losses
in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further
losses, unless it has incurred obligations or made payments on behalf of the associate.

In the Parent Company financial statements, investments in subsidiaries and an associate are carried at cost, less any impairment in value. Cost
represents the carrying value of the investments as at the quasi-reorganization date of the Parent Company as discussed in Note 2, reduced by
dividends subsequently received from the investees.

Property and Equipment

Depreciable properties such as leasehold improvements, and furniture, fixture and equipment are stated at cost less accumulated depreciation
and amortization and any impairment in value.

Land is stated at appraised values less any impairment in value while buildings are stated at appraised value less accumulated depreciation and
any impairment in value. The appraised values were determined by professionally qualified, independent appraisers in 2006. The revaluation
increment resulting from revaluation is credited to the ‘Revaluation increment on land and buildings’ under equity, net of applicable deferred
income tax.

The initial cost of property and equipment consists of its purchase price, including import duties, taxes and any directly attributable costs of
bringing the asset to its working condition and location for its intended use. Expenditures incurred after items of property and equipment have
been put into operation, such as repairs and maintenance are normally charged against operations in the year in which the costs are incurred.
In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected
to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures
are capitalized as an additional cost of property and equipment.

Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are
amortized over the shorter of the terms of the covering leases and the estimated useful lives of the improvements.

The estimated useful lives follow:

Useful Lives in
Years
Buildings 25 - 50
Furniture, fixtures and equipment 5
Leasehold improvements 3 - 10

The useful life and the depreciation and amortization method are reviewed periodically to ensure that the period and the method of depreciation
and amortization are consistent with the expected pattern of economic benefits from items of property and equipment.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in the statement of income in the year the asset is derecognized.

Investment Properties
Investment properties are measured initially at cost, including transaction costs. An investment property acquired through an exchange
transaction is measured at fair value of the asset acquired unless the fair value of such an asset cannot be measured in which case the
investment property acquired is measured at the carrying amount of asset given up. Foreclosed properties are classified under ‘Investment
properties’ from foreclosure date.

Subsequent to initial recognition, depreciable investment properties are carried at cost less accumulated depreciation and impairment in
value.

Investment properties are derecognized when they have either been disposed of or when the investment property is permanently withdrawn
from use and no future benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are
recognized in the statement of income under ‘Miscellaneous income’ in the year of retirement or disposal.

Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are normally
charged to income in the year in which the costs are incurred.
 BREAKTHROUGH ON ALL FRONTS 53

Depreciation is calculated on a straight-line basis using the remaining useful lives from the time of acquisition of the depreciable investment
properties ranging from 25 to 50 years.

Transfers are made to investment properties when, and only when, there is a change in use evidenced by ending of owner occupation,
commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment
properties when, and only when, there is a change in use evidenced by commencement of owner occupation or commencement of development
with a view to sale.

Intangible Assets
Exchange trading right
The exchange trading right, included in ‘Other assets’, was acquired, together with Philippine Stock Exchange (PSE) shares, in exchange for the
exchange membership seat under the conversion program of the PSE. The exchange trading right is carried at the amount allocated from the
original cost of the exchange membership seat (after a corresponding allocation for the value of the PSE shares) less allowance for impairment
losses, if any. The Group does not intend to sell the exchange trading right in the near future.

The exchange trading right is deemed to have an indefinite useful life as there is no foreseeable limit to the period over which the asset is
expected to generate net cash inflows for the Group. It is tested annually for any impairment in realizable value. Any impairment loss is charged
directly to the statement of income (see accounting policy on Impairment of Nonfinancial Assets).

Software costs
Software costs are capitalized on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortized
over five years on a straight-line basis.

Costs associated with maintaining the computer software programs are recognized as expense when incurred.

Impairment of Property and Equipment, Investment Properties and Intangible Assets

At each reporting date, the Group assesses whether there is any indication that its nonfinancial assets may be impaired. When an indicator of
impairment exists or when an annual impairment testing for an asset is required, the Group makes a formal estimate of recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable
amount is assessed as part of the cash generating unit to which it belongs. Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset.

An impairment loss is charged to operations in the period in which it arises, unless the asset is carried at a revalued amount, in which case the
impairment loss is charged to the revaluation increment of the said asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed
the carrying amount that would have been determined, net of depreciation and amortization, had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in the statement of income unless the asset is carried at a revalued amount, in which case the
reversal is treated as a revaluation increase. After such a reversal, the depreciation and amortization expense is adjusted in future period to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining life.

Intangible assets with indefinite useful lives are tested for impairment annually as of December 31 either individually or at the cash generating
unit level, as appropriate.

Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment
of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use
the asset. A reassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;
(b) A renewal option is exercised or extension granted, unless that term of the renewal or extension was initially included in the lease term;
(c) There is a change in the determination of whether fulfillment is dependent on a specified asset; or
(d) There is a substantial change to the asset.
54 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the
reassessment for scenarios (a), (c) or (d) above, and at the date of renewal or extension period for scenario (b).

Group as lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at
the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments and included
in ‘Property and equipment’ account with the corresponding liability to the lessor included in ‘Other liabilities’ account. Lease payments are
apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly to ‘Interest expense’.

Capitalized leased assets are depreciated over the shorter of the estimated useful lives of the assets or the respective lease terms, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating
lease payments are recognized as an expense in the statement of income on a straight-line basis over the lease term.

Group as lessor
Finance leases, where the Group transfers substantially all the risks and benefits incidental to ownership of the leased item to the lessee, are
included in the balance sheet under ‘Loans and receivables’ account. A lease receivable is recognized at an amount equivalent to the net
investment (asset cost) in the lease. All income resulting from the receivable is included in ‘Interest income’ in the statement of income.

Leases where the Group does not transfer substantially all the risks and benefits of ownership of the assets are classified as operating leases.
Lease payments received are recognized as an income in the statement of income on a straight-line basis over the lease term. Lease payments
received are recognized as an income in the statement of income on a straight line basis over the lease term. Initial direct costs incurred in
negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the
rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Retirement Benefits
The Group has a noncontributory defined benefit retirement plan.

The retirement cost of the Parent Company and certain subsidiaries is determined using the projected unit credit method. Under this method,
the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current period.
The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at
the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service
costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rate on government
bonds that have terms to maturity approximating the terms of the related retirement liability. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are credited to or charged against income when the net cumulative unrecognized actuarial
gains and losses at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of
plan assets at that date. These excess gains or losses are recognized over the expected average remaining working lives of the employees
participating in the plan.

Past-service costs, if any, are recognized immediately in the statement of income, unless the changes to the pension plan are conditional on
the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a
straight-line basis over the vesting period.

The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service costs not yet recognized and
less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset is restricted to the sum of any past
service cost not yet recognized and the present value of any economic benefits available in the form of refunds from the plan or reductions in
the future contributions to the plan.

Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an
outflow of assets embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is
presented in the statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized
as an interest expense.
 BREAKTHROUGH ON ALL FRONTS 55

Contingent Liabilities and Contingent Assets

Contingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of assets embodying
economic benefits is remote. Contingent assets are not recognized but are disclosed in the financial statements when an inflow of economic
benefits is probable.

Income Taxes
Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, including asset revaluations. Deferred tax assets are recognized for
all deductible temporary differences, carryforward of unused tax credits from the excess of minimum corporate income tax (MCIT) over the
regular corporate income tax (RCIT), and unused net operating loss carryover (NOLCO), to the extent that it is probable that sufficient taxable
income will be available against which the deductible temporary differences and carryforward of unused tax credits from MCIT and unused
NOLCO can be utilized. Deferred income tax, however, is not recognized on temporary differences that arise from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting income
nor taxable income.

Deferred tax liabilities are not provided on non-taxable temporary differences associated with investments in domestic subsidiaries and an
associate. With respect to investments in foreign subsidiaries and associates, deferred tax liabilities are recognized except where the timing of
the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred tax assets
are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable income will allow
the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are applicable to the period when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Current tax and deferred tax relating to items recognized directly in equity is also recognized in equity and not in the statement of income.

Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and
deferred taxes related to the same taxable entity and the same taxation authority.

Treasury Shares and Contracts on Own Shares

Own equity instruments which are acquired (treasury shares) are deducted from equity and accounted for at weighted average cost. No gain or
loss is recognized in the statement of income on the purchase, sale, issue or cancellation of the Parent Company’s own equity instruments.

Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income for the year attributable to common shareholders by the weighted average
number of common shares outstanding during the year after giving retroactive effect to stock dividends declared and stock rights exercised
during the year, if any.

Diluted EPS is calculated by dividing the aggregate of net income attributable to common shareholders and convertible preferred shareholders
by the weighted average number of common shares outstanding during the year adjusted for the effects of dilutive convertible preferred
shares.

Dividends on Common Shares

Dividends on common shares are recognized as a liability and deducted from equity when approved by the respective shareholders of the
Parent Company and subsidiaries. Dividends for the year that are approved after the balance sheet date are dealt with as an event after the
balance sheet date.

Subsequent Events
Any post-year-end event that provides additional information about the Group’s position at the balance sheet date (adjusting event) is reflected in
the financial statements. Post-year-end events that are not adjusting events, if any, are disclosed when material to the financial statements.

Segment Reporting
The Group’s operating businesses are organized and managed separately according to the nature of the products and services provided, with
each segment representing a strategic business unit that offers different products and serves different markets.
56 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Fiduciary Activities
Assets and income arising from fiduciary activities together with related undertakings to return such assets to customers are excluded from the
financial statements where the Parent Company acts in a fiduciary capacity such as nominee, trustee or agent.

Future Changes in Accounting Policies

The Group has not applied the following PFRS and Philippine Interpretations which are not yet effective for the year ended December 31, 2007:

Philippine Interpretation IFRIC 11, PFRS 2 Group and Treasury Share Transactions (effective for annual periods beginning on or after March 1, 2007)
This Interpretation requires arrangements whereby an employee is granted rights to an entity’s equity instruments to be accounted for as an
equity-settled scheme by the entity even if (a) the entity chooses or is required to buy those equity instruments (e.g., treasury shares) from
another party, or (b) the shareholder(s) of the entity provide the equity instruments needed. It also provides guidance on how subsidiaries, in
their separate financial statements, account for such schemes when their employees receive rights to the equity instruments of the parent.
The Group currently does not have any stock option plan and therefore, does not expect this Interpretation to have significant impact on its
financial statements.

Philippine Interpretation IFRIC 12, Service Concession Arrangements (effective for annual periods beginning on or after January 1, 2008)
This Interpretation covers contractual arrangements arising from private entities providing public services and is not relevant to the Group’s
current operations.

Philippine Interpretation IFRIC 14, PAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for
annual periods beginning on or after January 1, 2008)
This Interpretation provides guidance on how to assess the limit in PAS 19, Employee Benefits, on the amount of the surplus that can be
recognized as an asset, and how the pension assets or liability may be affected when there is a statutory or contractual minimum funding
requirement. The Group will assess the impact of adoption when it applies Philippine Interpretation IFRIC 14 in 2008.

Philippine Interpretation IFRIC 13, Customer Loyalty Programmes (effective for annual periods beginning on or after July 1, 2008)
This Interpretation addresses the accounting by an entity that grants award credits to its customers. The Group will assess the impact of
adoption when it applies Philippine Interpretation IFRIC 13 in 2008.

PFRS 8, Operating Segments (effective for annual periods beginning on or after January 1, 2009)
This PFRS adopts a management approach to reporting segment information. The information reported would be that which management
uses internally for evaluating the performance of operating segments and allocating resources to those segments. Such information may be
different from that reported in the balance sheet and statement of income and companies will need to provide explanations and reconciliations
of the differences. PFRS 8 will replace PAS 14, Segment Reporting and is required to be adopted only by entities whose debt or equity
instruments are publicly traded, or are in the process of filing with the SEC for purposes of issuing any class of instruments in a public market.
The Group will assess the impact of the standard on its current manner of reporting segment information.

Amendment to PAS 1, Presentation of Financial Statements - Amendment on Statement of Comprehensive Income, (effective for annual periods
beginning on or after January 1, 2009)
In accordance with the amendment to PAS 1, the statement of changes in equity shall include only transactions with owners, while all non-
owner changes will be presented in equity as a single line with details included in a separate statement. Owners are defined as holders of
instruments classified as equity.

The amendment to PAS 1 also provides for the introduction of a new statement of comprehensive income that combines all items of income
and expense recognized in the statement of income and expenses together with ‘other comprehensive income’. The revisions specify what
is included in other comprehensive income, such as gains and losses on AFS investments, actuarial gains and losses on defined benefit
pension plans and changes in the asset revaluation reserve. Entities can choose to present all items in one statement, or to present two
linked statements, a separate statement of income and expenses and a statement of comprehensive income. The Group does not expect this
amendment to have a significant impact on the financial statements.

PAS 23, (Revised) Borrowing Cost (effective for annual periods beginning on or after January 1, 2009)
The revised standard requires capitalization of borrowing costs that relate to a qualifying asset. The transitional requirements of the standard
require it to be adopted as a prospective change from the effective date. The Group expects that this Standard will not have any significant
impact on its financial statements.
 BREAKTHROUGH ON ALL FRONTS 57

4. Significant Accounting Judgments and Estimates

The preparation of the financial statements in accordance with PFRS requires the Group to make judgments and estimates that affect the
reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future events may
occur which will cause the assumptions used in arriving at the estimates to change. The effects of any change in estimates are reflected in the
financial statements as they become reasonably determinable.

Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.

Judgments
(a) Operating leases
The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains
all the significant risks and rewards of ownership of these properties which are leased out on operating lease basis.

(b) Fair value of financial instruments

Where the fair values of financial assets and financial liabilities recorded on the balance sheet cannot be derived from active markets, they
are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken
from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The
judgments include considerations of liquidity and model inputs such as correlation and volatility for longer dated derivatives.

(c) HTM investments

The classification to HTM investment requires significant judgment. In making this judgment, the Group evaluates its intention and
ability to hold such investments to maturity. If the Group fails to hold these investments to maturity other than in certain specific
circumstances - for example, selling an insignificant amount close to maturity - it will be required to reclassify the entire portfolio as ‘AFS
investments’. The investments would therefore be measured at fair value and not at amortized cost.

(d) Financial assets not quoted in an active market

The Group classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in
the evaluation on whether a financial asset is quoted in an active market is the determination on whether quoted prices are readily and
regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Estimates
(a) Impairment losses on loans and receivables
The Group reviews its impaired loans and receivables at each reporting date to assess whether additional provision for credit losses should
be recorded in the statement of income. In particular, judgment by management is required in the estimation of the amount and timing
of future cash flows when determining the level of required allowance. Such estimates are based on assumptions about a number of
factors and actual results may differ, resulting in future changes to the allowance.

In addition to specific allowance against individually significant loans and receivables, the Group also makes a collective impairment
allowance against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default
than when originally granted. This collective allowance takes into consideration any deterioration in the loan or investment rating from
the time the account was granted or amended, and such other factors as any deterioration in country risk, industry, and technological
obsolescence, as well as identified structural weaknesses or deterioration in cash flows and underlying property prices, among others.

As of December 31, 2007 and 2006, allowance for credit losses on loans and receivables amounted to P12.0 billion and P13.5 billion,
respectively, for the Group and P11.7 billion and P13.3 billion, respectively, for the Parent Company. As of December 31, 2007 and
2006, loans and receivables are carried at P76.6 billion and P83.6 billion, respectively, for the Group and P73.2 billion and P81.5 billion,
respectively, for the Parent Company (see Note 9).

(b) Fair values of structured debt instruments and derivatives

The fair values of structured debt instruments and derivatives that are not quoted in active markets are determined using valuation
techniques. Where valuation techniques are used to determine fair values, they are validated and periodically reviewed by qualified
personnel independent of the area that created them. All models are reviewed before they are used, and models are calibrated to ensure
that outputs reflect actual data and comparative market prices.

To the extent practicable, models use only observable data, however, areas such as credit risk (both own and counterparty), volatilities
and correlations require management to make estimates. Changes in assumptions about these factors could affect reported fair value of
financial instruments. Refer to Notes 6 and 30 for information on the fair values of these instruments.
58 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(c) Valuation of unquoted equity investments

Valuation of unquoted equity investments is normally based on one of the following:

• recent arm’s length market transactions;

• current fair value of another instrument that is substantially the same;
• the expected cash flows discounted at current rates applicable for terms with similar terms and risk characteristics; or
• other valuation models.

The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation. The Group
reviews the valuation techniques periodically and tests them for validity using either prices from observable current market transactions in
the same instrument or from other available observable market data. As of December 31, 2007 and 2006, unquoted equity instruments
amounted to P322.1 million and P533.3 million, respectively, for the Group and P319.6 million and P530.8 million, respectively, for the
Parent Company (see Note 11).

(d) Impairment of AFS equity investments

The Group treats AFS equity investments as impaired when there has been a significant or prolonged decline in the fair value below its
cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires judgment.
The Group treats ‘significant’ generally as 20.00% or more and ‘prolonged’ greater than 6 months. In addition, the Group evaluates
other factors, including normal volatility in share price for quoted equities and the future cash flows and the discount factors for unquoted
equities.

Refer to Note 11 for the information on the carrying amounts of these investments.

(e) Recognition of deferred income taxes

Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against
which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies.

The Group’s estimates of future taxable income indicate that certain temporary differences will be realized in the future. As discussed in
Note 25, recognized net deferred tax assets as of December 31, 2007 and 2006 amounted to P1.8 billion for the Group and the Parent
Company. Deferred tax assets on the temporary differences amounting to P8.9 billion and P9.3 billion for the Group and the Parent
Company as of December 31, 2007 and 2006, respectively, were not recognized.

(f) Present value of retirement obligation

The cost of defined benefit pension plan and other post employment benefits is determined using actuarial valuations. The actuarial
valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and
future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty.

The expected rate of return on plan assets was based on the market prices prevailing on the date applicable to the period over which the
obligation is to be settled. The assumed discount rates were determined using the market yields on Philippine government bonds with
terms consistent with the expected employee benefit payout as of balance sheet dates. Refer to Note 23 for the details of assumption
used in the calculation.

As of December 31, 2007 and 2006, the present value of the defined benefit obligation of the Parent Company amounted to P1.6 billion
and P2.0 billion, respectively (see Note 23).

(g) Impairment of property and equipment and investment properties

The Group assesses impairment on assets whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The factors that the Group considers important which could trigger an impairment review include the following:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of use of the acquired assets or the strategy for overall business; and
• significant negative industry or economic trends.

The Group recognizes an impairment loss whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable
amount is computed using the value in use approach. Recoverable amounts are estimated for individual assets.
 BREAKTHROUGH ON ALL FRONTS 59

As of December 31, 2007, the carrying value of the property and equipment and investment properties amounted to P16.5 billion
and P24.8 billion, respectively, for the Group and P16.4 billion and P24.7 billion, respectively, for the Parent Company. As of
December 31, 2006, the carrying value of the property and equipment and investment properties amounted to P16.6 billion and
P24.9 billion, respectively, for the Group and P16.5 billion and P24.8 billion, respectively, for the Parent Company (see Notes 12 and 14).

(h) Estimated useful lives of property and equipment and investment properties
The Group estimates the useful lives of its property and equipment and investment properties. This estimate is reviewed periodically to
ensure that the period of depreciation and amortization are consistent with the expected pattern of economic benefits from the items of
property and equipment and investment properties.

As of December 31, 2007, the carrying value of depreciable property and equipment and investment properties amounted to P5.5 billion and
P4.1 billion, respectively, for the Group and P5.4 billion and P4.1 billion, respectively, for the Parent Company. As of December 31, 2006, the
carrying value of depreciable property and equipment and investment properties amounted to P5.6 billion and P6.6 billion, respectively, for
the Group and P5.5 billion and P6.5 billion, respectively, for the Parent Company (see Notes 12 and 14).

5. Financial Risk Management Objectives and Policies

Introduction
A bank’s ability to capture and measure risks on an enterprise wide basis, to monitor them on a regular basis, and to manage them is
increasingly becoming a compelling factor, not only on a compliance basis, but where competitive advantage is concerned.

The Group’s activities are principally related to the development, delivery, servicing and use of financial instruments. Risk is inherent in these
activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls.
This process of risk management is critical to the Group’s continuing profitability.

To ensure the long-term success of the Parent Company, and its subsidiaries and affiliates as a whole, and to assure growth, the Parent
Company’s risk management and risk controlling activities are directed at ensuring the careful handling and professional management of credit
risks, market, liquidity and funding risks and operational risks.

Further, the Parent Company is also exposed to other types of risk such as technology risk, strategic and business risks, compliance risk and legal
risk. These are correspondingly monitored by the Parent Company’s Risk Management Group (RMG). Compliance risk is regularly managed
and monitored by the Parent Company’s Compliance Division.

The Group accepts deposits from customers at fixed rates, and for various periods, and seeks to earn above-average interest margins by
investing these funds in high-quality assets. The Group seeks to optimize net interest margin by managing its sources and uses of funds
according to interest rate, tenor and diversity.

The Group also seeks to raise its interest margins by obtaining above-average margins, net of allowances, through lending to commercial and
retail borrowers with a range of credit standing. Such exposures involve not just on-balance sheet loans and advances. The Group also enters
into guarantees and other commitments such as letters of credit (LCs) and performance and other bonds. Further, the Parent Company also
engages in various structured transactions which are managed by the Business Development Sector in coordination with Credit Management
and Treasury Sectors.

The Group trades in financial instruments where it takes positions in traded and over-the-counter instruments, including derivatives, and takes
advantage of short-term market movements in equities and bonds and in currency and interest rate. The Group places trading limits on the
level of exposure that can be taken in relation to both overnight and intra-day market positions.

Risk Management Functional Organization

The risk functional organization of the Parent Company must conform to the BSP regulations, that the risk management function must be
independent of the business line.

The Parent Company adheres to the three primary functions involved in the risk management process in order to attain a system of “check
and balance”:
1. Risk-Taking Personnel (RTP) Function - initiates and takes the risks duly authorized by the BOD which includes personnel in the front office
of treasury and lending.

2. Risk Management Function - assists the RTP and the back office (operations) in identifying, measuring, analyzing and managing risks. This
function also performs the independent limits monitoring.
60 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

3. Audit and Compliance Function - performs the day-today compliance check with the approved risk policies. This function is the task of
the Internal Audit Group, Compliance Office and External Auditors.

The fulfillment of the risk management functions of the BOD is delegated to the Risk Management Committee (RMC), which is composed of
five (5) directors. It is primarily responsible for the execution of the Enterprise Risk Management (ERM) framework. The RMC’s main concerns
include:

• Formulation of the risk policies, strategies, principles, framework and limits;

• Management of the fundamental risk issues and monitoring of relevant risk decisions;
• Providing support to management in implementing the risk policies and strategies; and
• Development of a risk awareness program.

Enterprise Risk Management Framework

The Parent Company’s ERM framework revolves around the following eight (8) interrelated risk management approaches:

1. Internal Environment Scanning. The internal environment scanning involves the review of the overall prevailing risk framework to
determine how risk is viewed and addressed by management, including risk management philosophy, risk appetite, integrity and ethical
values.

2. Objective Setting. The BOD mandates management to set the overall annual target via the business planning activities. Enterprise risk
management ensures that management has a process in place to set objectives and that the chosen objectives support and are aligned
with the entity’s mission and are consistent with its risk appetite.

3. Event Identification. Internal and external events affecting the achievement of the Parent Company’s objectives are identified,
distinguishing between risks and opportunities. Opportunities are channeled back to management’s strategy or objective-setting
processes.

4. Risk Assessment. Risks are analyzed, considering the likelihood (probability) and impact (severity) of potential loss, as a basis for
determining how they should be managed. Under this approach, the Parent Company focuses on the Business Impact Analysis of major
risks. Risks are assessed on an inherent and a residual basis and the process initially considers which risks are controllable, uncontrollable,
requires immediate management’s attention, or which risk shall materially weaken the Parent Company’s earnings and capital.

5. Risk Response. Management has discretion to select risk appropriate responses to mitigate risk either to avoid, accept, reduce, transfer
or share risk. Management, in coordination with RMC, establishes limits to align risks with the Parent Company’s risk tolerances and risk
appetite.

6. Control Activities. Policies and procedures are established and implemented to help ensure that the decided responses are uniformly and
effectively carried out across the institution.

7. Information and Communication. Relevant information is identified, captured, and communicated in a form, substance and timeframe
that enable all Parent Company personnel to carry out their responsibilities.

8. Monitoring. Under the ERM, the middle office (i.e., RMG, Internal Audit Group, and Compliance Office) constantly monitor the
management of risk via risk limits, audit review, revalidation of risk strategies and compliance check, with modifications being made as
necessary. Monitoring is accomplished through a continuous reporting system with the support of the Parent Company’s Management
Information System (MIS) Group.

Risk Management Group

The RMG, which reports to the RMC, is composed of the following:

i. Credit Risk Management Division

ii. Market Risk Management Division
iii. Operations Risk Management Division
iv. Information Security and Technology Risk Unit

The RMG is responsible for ensuring that management implements and maintains risk related procedures. It is also responsible for monitoring
compliance with risk principles, policies and limits across the Parent Company. It is mandated to:

• identify, analyze and measure risks from the Parent Company’s trading, position-taking, lending, borrowing and other risk taking
activities;
 BREAKTHROUGH ON ALL FRONTS 61

• assist the risk-taking personnel in implementing risk reduction strategies; and

• analyze exposures and recommend limits.

Credit Risk
Credit risk is the non-recovery of credit exposures (on and off balance sheet exposures). Managing credit risk also involves monitoring of
migration risk, concentration risk, country risk and settlement risk. The Parent Company manages its credit risk at various levels (i.e., strategic
level, portfolio level down to individual transaction).

The credit risk management of the entire loan portfolio is under the direct oversight of the RMC. Credit risk management of individual
borrower is performed by the business sector and remedial sector. Risk management is embedded in the entire credit process i.e. from credit
origination to remedial management (if needed).

Among the tools used by the Parent Company in identifying, assessing and managing credit risk include:

• Documented credit policies and procedures: sound credit granting process, risk asset acceptance criteria, target market, approving
authorities, and etc.;
• System for administration and monitoring of exposure;
• Portfolio management;
• Pre-approval review of loan proposals;
• Post approval review of implemented loans;
• Work out system for managing problem credits;
• Regular review of the sufficiency of valuation reserves;
• Monitoring of the adequacy of capital for credit risk via the capital adequacy ratio (CAR) report;
• Monitoring of breaches in regulatory and internal limits;
• Credit Risk Management Dashboard;
• Diversification; and
• Active loan portfolio management undertaken to identify the following:
a. portfolio growth
b. loss rate
c. recovery rate
d. trend of nonperforming loans (NPL)
e. concentration risk (per classified account, per industry, clean exposure, large exposure, contingent exposure, demographic, etc)
f. Internal Risk Rating System for corporate accounts
g. Credit Scoring for retail accounts

The magnitude of key changes in the Parent Company has been quite comprehensive for the last five years under the new management.
Continuous changes have been made in the policies, procedures, system and quality of people. The Parent Company has moved one step
further by collecting data on risk rating of loan borrowers with an asset size of P15.0 million and above as initial requirement in the Parent
Company’s model for internal Probability of Default (PD) and Loss Given Default (LGD).

Credit-related commitments
The exposures represent guarantees, standby LCs issued by the Parent Company and documentary/commercial LCs which are written
undertakings by the Parent Company. To mitigate this risk the Parent Company requires hard collaterals for standby LCs lines while commercial
LCs are collateralized by the underlying shipments of goods to which they relate.

Excessive risk concentration

Credit risk concentrations can arise whenever a significant number of borrowers have similar characteristics. The Parent Company analyzes
the credit risk concentration to an individual borrower, related group of accounts, industry, geographic, internal rating buckets, currency, term
and security. For risk concentration monitoring purposes, the financial assets are broadly categorized into (1) loans and receivables and (2)
trading and financial investment securities. To mitigate risk concentration, the Parent Company constantly checks for breaches in regulatory
and internal limits.

Derivative financial instruments

Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the balance
sheet.
62 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Credit risk exposures

The table below shows the gross maximum exposure to on- and off-balance sheet credit risk exposures (including derivatives) as of December
31, 2007 and 2006, without considering the effects of collateral, credit enhancements and other credit risk mitigation techniques:

Consolidated Parent Company

2007 2006 2007 2006
(In Million Pesos)
COCI and due from BSP (excluding cash on hand) P28,020 P13,861 P28,017 P13,858
Due from other banks 3,962 3,556 2,860 2,314
Interbank loans receivable 13,197 22,413 12,825 22,093
SPURA 11,200 15,700 11,200 15,700
Financial assets at FVPL:
Government securities 1,963 148 1,963 148
Derivative assets 1,173 961 1,173 961
Equity securities 79 29 58 –
3,215 1,138 3,194 1,109
Loans and receivables (excluding unquoted debt securities)*:
Business loans 36,640 32,013 35,300 30,631
GOCCs and NGAs 11,304 14,198 11,304 14,198
LGUs 5,312 4,668 5,312 4,667
Consumers 3,954 3,244 3,719 2,950
Fringe benefits 859 738 859 733
Others 10,202 9,211 8,364 8,766
68,271 64,072 64,858 61,945
Receivables from SPV - net 726 1,361 726 1,361
Financial investments:
Government securities 32,756 29,711 32,075 27,867
Other debt securities 11,767 13,801 11,585 13,575
Unquoted debt securities - net 8,304 19,520 8,304 19,520
Unquoted equity securities - net 422 533 320 531
Quoted equity securities - net 322 334 344 269
53,571 63,899 52,628 61,762
182,162 186,000 176,308 180,142
Commitments 9,783 10,049 9,783 10,049
P191,945 P196,049 P186,091 P190,191
*The Group follows the BOD approved policy on the generic classification of loans based on the type of borrowers and the purpose of the loan.

a. Limit per Client or Counterparty

For loans and receivables, the Parent Company sets an internal limit for each individual borrower up to 5% of the qualifying capital (see
Note 22). The limit to group exposure is 100% of the single borrower’s limit (SBL) for loan accounts rated credit risk rating (CRR) 1 to CRR
5 or 50% of SBL if rated below CRR 5.

For trading and investment securities, the Parent Company limits investments to government issues and securities issued by entities with
high-quality investment ratings.

b. Geographic Concentration
The Group’s credit risk exposures, before taking into account any collateral held or other credit enhancements, are categorized by
geographic location as follows:
Consolidated Parent Company
2007 2006 2007 2006
(In Million Pesos)
Philippines P164,018 P166,779 P159,641 P162,867
Other European Union Countries 14,681 17,548 14,308 17,369
Asia (excluding the Philippines) 6,717 6,497 6,715 5,315
USA and Canada 3,863 1,195 2,761 1,051
United Kingdom 2,666 4,030 2,666 3,589
Total P191,945 P196,049 P186,091 P190,191
 BREAKTHROUGH ON ALL FRONTS 63

c. Concentration by Industry
The tables below show the industry sector analysis of the Group and Parent Company’s financial assets as of December 31, 2007 at gross
amounts, before taking into account the fair value of the loan collateral held or other credit enhancements.

Consolidated
December 31, 2007
Gross Maximum Exposure Fair Market Value
Amount % of Collateral
(Amounts in Million Pesos)
Loans and Receivables
Primary target industry
Manufacturing P9,621 12.16 P9,581
Electricity, gas and water 9,613 12.15 13,052
Wholesale and retail 8,891 11.23 13,105
Agriculture, hunting and forestry 7,541 9.53 2,515
Financial intermediaries 6,112 7.72 13,840
Transport, storage and communications 4,959 6.27 3,074
Public administration and defense 2,444 3.09 1,371
Secondary target industry
Real estate, renting and business activities 8,396 10.61 17,094
Construction 2,120 2.68 4,325
Others* 5,091 6.43 31,226
Other receivables 14,361 18.13 –
P79,149 100.00 P109,183
Trading and Financial Investment Securities
Government P37,492 66.02 P –
Financial intermediaries 12,047 21.21 –
Manufacturing 5,290 9.32 –
Electricity, gas and water 823 1.45 –
Real estate, renting and business activities 255 0.45 –
Others 879 1.55 –
P56,786 100.00 P–
Other Financial Assets
Government P42,302 74.07 P11,200
Financial intermediaries 14,077 24.65 –
Others 726 1.28 –
P57,105 100.00 P11,200

Consolidated
December 31, 2006
Gross Maximum Exposure Fair Market Value
Amount % of Collateral
(Amounts in Million Pesos)
Loans and Receivables
Primary target industry
Wholesale and retail P13,520 17.71 P108,969
Manufacturing 8,943 11.72 9,251
Transport, storage and communications 7,299 9.56 3,991
Public administration and defense 5,192 6.80 2,425
Electricity, gas and water 5,071 6.64 2,590
Financial intermediaries 4,341 5.69 7,073
Agriculture, hunting and forestry 3,240 4.24 2,919
Secondary target industry
Real estate, renting and business activities 6,299 8.25 9,358
Construction 2,400 3.14 4,571
Others* 5,883 7.71 15,797
Other receivables 14,144 18.54 –
P76,332 100.00 P166,944
(Forward)
64 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Consolidated
December 31, 2006
Gross Maximum Exposure Fair Market Value
Amount % of Collateral
(Amounts in Million Pesos)
Trading and Financial Investment Securities
Government P43,010 66.13 P –
Financial intermediaries 13,654 20.99 –
Manufacturing 6,473 9.95 –
Electricity, gas and water 993 1.52 –
Real estate, renting and business activities 325 0.50 –
Others 582 0.91 –
P65,037 100.00 P–
Other Financial Assets
Government P34,333 59.57 P15,700
Financial intermediaries 21,197 37.99 –
Others 1,361 2.44 –
P56,891 100.00 P15,700
* Others include the following sectors - Other community, social and personal services, private household, hotel and restaurant, education, mining and quarrying, and health
and social work

Parent Company
December 31, 2007
Gross Maximum Exposure Fair Market Value
Amount % of Collateral
(Amounts in Million Pesos)
Loans and Receivables
Loans receivables
Primary target industry
Electricity, gas and water P9,613 12.76 P13,052
Manufacturing 9,084 12.06 9,581
Wholesale and retail 8,680 11.52 13,105
Agriculture, hunting and forestry 7,518 9.98 2,515
Financial intermediaries 6,089 8.08 13,832
Transport, storage and communications 4,657 6.18 3,074
Public administration and defense 2,444 3.25 1,371
Secondary target industry
Real estate, renting and business activities 8,387 11.14 17,094
Construction 2,111 2.80 4,325
Others* 4,275 5.68 31,045
Other receivables 12,457 16.55 –
P75,315 100.00 P108,994
Trading and Financial Investment Securities
Government P36,811 65.94 P–
Financial intermediaries 11,996 21.49 –
Real estate, renting and business activities 5,290 9.48 –
Manufacturing 823 1.47 –
Electricity, gas and water 206 0.37 –
Others 696 1.25 –
P55,822 100.00 P–
Other Financial Assets
Government P42,300 76.04 P11,200
Financial intermediaries 12,602 22.65 –
Others 726 1.31 –
P55,628 100.00 P11,200
 BREAKTHROUGH ON ALL FRONTS 65

Parent Company
December 31, 2006
Gross Maximum Exposure Fair Market Value
Amount % of Collateral
(Amounts in Million Pesos)
Loans and Receivables
Loans receivable
Primary target industry
Wholesale and retail P13,336 18.05 P108,969
Manufacturing 8,277 11.21 9,251
Transport, storage and communications 6,900 9.34 3,991
Public administration and defense 5,119 6.93 2,425
Electricity, gas and water 5,071 6.86 2,590
Financial intermediaries 4,820 6.53 7,073
Agriculture, hunting and forestry 2,872 3.89 2,919
Secondary target industry
Real estate, renting and business activities 6,271 8.49 9,358
Construction 2,400 3.25 4,571
Others* 5,230 7.08 15,797
Other receivable 13,569 18.36 –
P73,865 100.00 P166,944
Trading and Financial Investment Securities
Government P41,166 65.48 P –
Financial intermediaries 13,604 21.64 –
Manufacturing 6,444 10.25 –
Electricity, gas and water 993 1.58 –
Real estate, renting and business activities 308 0.49 –
Others 356 0.56 –
P62,871 100.00 P–
Other Financial Assets
Government P34,492 62.34 P15,700
Financial intermediaries 19,473 35.20 –
Others 1,361 2.46 –
P55,326 100.00 P15,700
* Others include the following sectors – Other community, social and personal services, private household, hotel and restaurant, education, mining and quarrying, and
health and social work

The internal limit of the Parent Company is 12% for primary target industry, 10% for secondary market and 7% for non-target industry vs. total
loan portfolio. As of December 31, 2007, the Parent Company does not have loan concentration risk to any particular industry.

Collateral and other credit enhancement

As a general rule, character is the single most important consideration in granting loans. However, collaterals are requested to mitigate
risk. The loan value and type of collateral required depend on the assessment of the credit risk of the borrower or counterparty. The Parent
Company follows guidelines on the acceptability of types of collateral and valuation parameters.

The main types of collateral obtained are as follows:

• For corporate accounts - cash, guarantees, securities, physical collaterals (e.g. real estate, chattels, inventory, etc.); as a general rule,
commercial, industrial and residential lots are preferred
• For retail lending - mortgages on residential properties and vehicles financed

The disposal of the foreclosed properties is handled by the Asset Management Sector which adheres to the general policy of disposing assets
at the highest possible market value.

Management regularly monitors the market value of collateral and requests additional collateral in accordance with the underlying agreement.
The existing market value of collateral is considered during the review of the adequacy of the allowance for credit losses.
66 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Credit quality per class of financial assets

The credit quality of financial assets is assessed and managed using external and internal ratings. For loan exposures, the credit quality is
generally monitored using the 14-grade CRRS which is integrated in the credit process particularly in loan pricing and allocation of valuation
reserves. The model on risk ratings is assessed and updated regularly.

Validation of the internal risk rating is conducted by the Credit Policy Division to maintain accurate and consistent risk ratings across the
credit portfolio. The rating system has two parts, namely, the borrower’s rating and the facility rating. It is supported by a variety of financial
analytics, combined with an assessment of management and market information to provide the main inputs for the measurement of credit or
counterparty risk.

The table below shows the Parent Company’s loans receivables exposure per rating as of December 31, 2007.

Moody’s Unsecured share

Equivalent grades of exposure Total
Risk rating class 1 High Grade P4,162 P4,622
Risk rating class 2 High Grade 1,086 1,316
Risk rating class 3 High Grade 2,980 4,043
Risk rating class 4 High Grade 4,874 7,166

Risk rating class 5 Standard 1,205 1,380

Risk rating class 6 Standard 1,022 1,315
Risk rating class 7 Standard 4,866 5,452
Risk rating class 8 Standard 357 662
Risk rating class 9 Standard 180 572
Risk rating class 10 Standard 212 383

Risk rating class 11 Substandard 224 1,659

Risk rating class 12 Substandard 1,731 2,961
Risk rating class 13 Substandard 1,561 5,000
Risk rating class 14 Impaired 984 1,538
Total 25,444 38,069
Unrated 14,291 24,789
P39,735 P62,858

The table below shows the credit quality by class of debt financial assets, excluding other receivables (gross of allowance for credit losses) of
the Group as of December 31, 2007:

Neither Past Due nor Individually Impaired Past Due or
Standard Substandard Individually
High Grade Grade Grade Others Impaired Total
(In Million Pesos)
COCI and due from BSP P27,962 P– P– P52 P– P28,014
Due from other banks 3,962 – – – – 3,962
Interbank loans receivable 13,197 – – – – 13,197
SPURA 11,200 – – – – 11,200
Financial assets at FVPL:
Derivative assets 63 1,110 – – – 1,173
Government securities 131 1,832 – – – 1,963
Loans receivables:
Business loans 17,147 9,726 3,294 2,166 8,864 41,197
GOCCs and NGAs – – – 9,772 1,671 11,443
LGUs – – – 5,322 – 5,322
Consumers – – – 5,458 458 5,916
Fringe benefits – – – 858 52 910
Receivables from SPV – – – – 726 726
Financial investments:
Quoted government debt securities – 32,758 – – – 32,758
Other debt securities 10,910 855 – – – 11,765
Unquoted debt securities – 1,684 2,741 – 5,460 9,885
Total P84,572 P47,965 P6,035 P23,628 P17,231 P179,431
 BREAKTHROUGH ON ALL FRONTS 67

The ‘Individually Impaired’ category includes restructured loans receivables of the Parent Company, with the carrying amounts as of
December 31, 2007 shown below. Of the P11 billion total impaired loans, 39% or P4.3 billion is restructured loans (in million pesos):

Business loans P4,277

Consumers 5
P4,282

The table below shows the aging analysis of past due but not impaired loans receivables per class that the Parent Company held as of
December 31, 2007. Under PFRS 7, a financial asset is past due when a counterparty has failed to make a payment when contractually due.

Less than 31 to 91 to
30 days 90 days 180 days Total
(In Million Pesos)
Business loans P981 P92 P54 P1,127
LGUs 63 – 36 99
Consumers 55 33 70 158
Fringe benefits 2 3 1 6
Total P1,101 P128 P161 P1,390

Impairment Assessment
The Parent Company recognizes impairment losses based on the results of its specific (individual) and collective assessment of its credit
exposures. Impairment has taken place when there is a presence of known difficulties in the payment of obligation by counterparties, a
significant credit rating downgrade takes place, infringement of the original terms of the contract has happened, or when there is an inability
to pay principal or interest overdue beyond a certain threshold (e.g., 90 days). These and other factors, either singly or in tandem with other
factors, constitute observable events and/or data that meet the definition of an objective evidence of impairment.

The two methodologies applied by the Parent Company in assessing and measuring impairment include:

a. Specific (individual) assessment

The Parent Company assesses each individually significant credit exposure or advances for any objective evidence of impairment.

Among the items and factors considered by the Parent Company when assessing and measuring specific impairment allowances are:

• the going concern of the borrower’s business

• the ability of the borrower to repay its obligations during financial crises
• the projected receipts or expected cash flows
• the availability of other sources of financial support
• the existing realizable value of collateral
• the timing of the expected cash flows

The impairment allowances, if any, are evaluated every quarter or as the need arises in view of favorable or unfavorable developments.

b. Collective assessment
Allowances are assessed collectively for losses on loans and advances that are not individually significant (e.g. credit cards, housing
loans, car loans, development incentives loans, fringe benefit loans) and for individually significant loans and advances where there is no
apparent evidence of individual impairment. A particular portfolio is reviewed every quarter to determine its corresponding appropriate
allowances.

Impairment losses are estimated by taking into consideration the following information:

• historical losses of the portfolio;

• current adverse economic conditions that have direct impact on the portfolio;
• losses which are likely to occur but has not yet occurred; and
• expected receipts and recoveries once impaired.

See Note 16 for more detailed information with respect to the allowance for impairment losses on loans and advances to customers.
68 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Liquidity Risk and Funding Management

Liquidity risk is generally defined as the current and prospective risk to earnings or capital arising from the Parent Company’s inability to meet
its obligations when they come due without incurring unacceptable losses or costs.

The Parent Company’s liquidity management involves maintaining funding capacity to accommodate fluctuations in asset and liability levels due
to changes in the Parent Company’s business operations or unanticipated events created by customer behavior or capital market conditions.
The Parent Company seeks to ensure liquidity through a combination of active management of liabilities, a liquid asset portfolio composed
substantially of deposits in primary and secondary reserves, and the securing of money market lines and the maintenance of repurchase
facilities to address any unexpected liquidity situations.

Liquidity risk is monitored and controlled primarily by a gap analysis of maturities of relevant assets and liabilities reflected in the maximum
cumulative outflow (MCO) report, as well as an analysis of available liquid assets. The MCO focuses on a 12-month period wherein the
12-month cumulative outflow is compared to the acceptable MCO limit set by the BOD. Furthermore, an internal liquidity ratio has been set
to determine sufficiency of liquid assets over deposit liabilities.

Liquidity is monitored by the Parent Company on a daily basis and under assumed stressed situations. The table below shows the maturity
profile of the Parent Company’s liabilities as of December 31, 2007 based on the contractual undiscounted cash flows:

2007
Up to 1 to 3 3 to 6 6 to 12 Beyond
1 month months months months 1 year Total
(In Million Pesos)
Deposit liabilities:
Demand P19,952 P– P– P– P– P19,952
Savings 112,606 11,048 3,493 1,922 8,227 137,296
Time 14,331 4,382 3,974 879 77 23,643
Bills and acceptances payable 970 36 353 – 2,115 3,474
Subordinated debt – – – – 8,416 8,416
Derivative liabilities 68 – – – – 68
Accrued taxes, interest and expenses and other liabilities* 190 613 251 543 6,025 7,622
Total financial liabilities P148,117 P16,079 P8,071 P3,344 P24,860 P200,471
* includes future interest payments of deposit liabilities, bills and acceptances payable and subordinated debt.

The table below shows the maturity profile of the Parent Company’s liabilities based on its internal methodology that manages liquidity based
on expected undiscounted cash flows, rather than contractual undiscounted cash flows:

2006
Up to 1 to 3 3 to 6 6 to 12 Beyond
1 month months months months 1 year Total
(In Million Pesos)
Deposit liabilities:
Demand P827 P1,161 P1,741 P3,483 P10,611 P17,823
Savings 3,399 6,004 9,006 18,012 103,665 140,086
Time 5,304 4,615 6,843 9,062 – 25,824
Bills and acceptances payable 854 1 – – 9,507 10,362
Subordinated debt – – – – 8,389 8,389
Accrued taxes, interest and expenses and other liabilities 10,730 771 130 1,091 3,184 15,906
Total financial liabilities P21,114 P12,552 P17,720 P31,648 P135,356 P218,390

Further, the liquidity information for 2007 includes coupon cash flows categorized by contractual timing. Had the Parent Company’s time
buckets include “On Demand” financial liabilities that are demandable and due (such as the demand deposit liabilities), P20.0 billion as of
December 31, 2007 would have to be presented separately under a category captioned “On Demand”.

As of December 31, 2007, the Parent Company’s combined contingent liabilities and commitments amounted to P9.8 billion.
 BREAKTHROUGH ON ALL FRONTS 69

Market Risk
Market risk is the risk to earnings or capital arising from adverse movements in factors that affect the market value of instruments, products,
and transactions in an institutions’ overall portfolio. Market risk arises from market making, dealing, and position taking in interest rate and
foreign exchange markets. The succeeding sections provide discussion on the impact of market risk on the Parent Company’s trading and
structural portfolios.

Trading Market Risk

Trading market risk exists in the Parent Company as the values of its trading positions are sensitive to changes in market rates such as interest
rates, foreign exchange rates and equity prices. The Parent Company is exposed to trading market risk in the course of market making as well
as from taking advantage of market opportunities. The Parent Company adopts the parametric Value at Risk (VaR) methodology (with 99%
confidence level and one to ten day holding period) to measure the Parent Company’s trading market risk with volatilities based on historical
data for a rolling one year period. VaR limits have been established annually and exposures against the VaR limits are monitored on a daily basis.
The VaR figures are back tested against actual and hypothetical profit and loss to validate the robustness of the VaR model. To complement VaR
measure, the Parent Company performs stress testing wherein the trading portfolios are valued under extreme market scenarios not covered
by the confidence interval of the VaR model.

Objectives and Limitations of the VaR Methodology

The VaR models are designed to measure market risk in a normal market environment. The models assume that any changes occurring in the
risk factors affecting the normal market environment will follow a normal distribution. The use of VaR has limitations because it is based on
historical correlations and volatilities in market prices and assumes that future price movements will follow a statistical distribution. Due to the
fact that VaR relies heavily on historical data to provide information and may not clearly predict the future changes and modifications of the
risk factors, the probability of large market moves may be underestimated if changes in risk factors fail to align with the normal distribution
assumption. VaR may also be under- or over- estimated due to the assumptions placed on risk factors and the relationship between such
factors for specific instruments. Even though positions may change throughout the day, the VaR only represents the risk of the portfolios at
the close of each business day, and it does not account for any losses that may occur beyond the 99.00% confidence level.

The VaR figures are back tested against actual and hypothetical profit and loss of the trading book to validate the robustness of the VaR model.
Likewise, to complement VaR measure, the Parent Company performs stress tests wherein the trading portfolios are valued under extreme
market scenarios not covered by the confidence interval of the Parent Company’s VaR model.

VaR Assumptions/Parameters
VaR estimates the potential loss on the current portfolio assuming a specified time horizon and level of confidence at 99.00%. The use of a
99.00% confidence level means that, within a one day horizon, losses exceeding the VaR figure should occur, on average, not more than once
every one hundred days.

Since VaR is an integral part of the Parent Company’s market risk management, VaR limits have been established annually for all financial
trading activities and exposures against the VaR limits are monitored on a daily basis. Limits are based on the tolerable risk appetite of the
Parent Company.

There is no instance for the year ended December 31, 2007 that the aggregate daily losses were greater than the total VaR (amounts in million
pesos).

Foreign Interest
Exchange Rate Equities Price Total VaR
December 31, 2007 P18.54 P37.02 P3.27 P58.83
2007-Average Daily 14.60 91.35 4.04 105.95
2007-Highest 33.30 224.66 5.68 257.96
2007-Lowest 1.96 0.06 2.84 2.02

Note: The high and low of the total portfolio may not equal to the sum of the individual components as the high and lows of the individual portfolios may have occurred
on different trading days.

The VaR for foreign exchange is the foreign exchange risk throughout the Parent Company. The Parent Company, when aggregating the
foreign exchange VaR and interest VaR, does not consider the correlation effects between the two risks.

Equities trading was approved by the BOD and commenced in October 2007.

The Parent Company also dimensions the potential risk on AFS portfolio. As of December 31, 2007, VAR for the AFS portfolio amounted to
P747.9 million for the 10 day horizon.
70 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Structural Market Risk

Interest Rate Risk
The Parent Company seeks to ensure that exposure to fluctuations in interest rates are kept within acceptable limits. Interest margins may
increase as a result of such changes but may be reduced or may create losses in the event that unexpected movements arise.

Repricing mismatches will expose the Parent Company to interest rate risk. The Parent Company measures the sensitivity of its assets and
liabilities to interest rate fluctuations by way of a “repricing gap” analysis using the repricing characteristics of its balance sheet positions
tempered with approved assumptions. To evaluate earnings exposure, interest rate sensitive liabilities in each time band are subtracted from
the corresponding interest rate assets to produce a “repricing gap” for that time band. The difference in the amount of assets and liabilities
maturing or being repriced over a one year period would then give the Parent Company an indication of the extent to which it is exposed to
the risk of potential changes in net interest income. A negative gap occurs when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. Vice versa, positive gap occurs when the amount of interest rate sensitive assets exceeds the amount
of interest rate sensitive liabilities.

During a period of rising interest rates, a company with a positive gap is better positioned because the company’s assets are refinanced at
increasingly higher interest rates increasing the net interest margin of the company over time. During a period of falling interest rates, a
company with a positive gap would show assets repricing at a faster rate than one with a negative gap, which may restrain the growth of its
net income or result in a decline in net interest income.

For risk management purposes, the repricing gap covering the one year period is multiplied by an assumed change in interest rates to yield an
approximation of the change in net interest income that would result from such an interest rate movement. The Parent Company’s BOD sets
a limit on the level of earnings at risk (EaR) exposure tolerable to the Parent Company. Compliance to the EaR limit is monitored monthly by
the RMG.

The following table sets forth the repricing gap position of the Parent Company as of December 31, 2007 and 2006:

2007
Up to 1 to 3 3 to 6 6 to 12 Beyond
1 month months months months 1year Total
(In Million Pesos)
Financial Assets
COCI P– P– P– P– P4,732 P4,732
Placements with the BSP and other banks 13,458 6,880 8,083 2,400 – 30,821
Interbank loans receivable 12,825 – – – – 12,825
SPURA 11,200 – – – – 11,200
Financial assets at FVPL
Derivative assets – – – – 1,173 1,173
Government securities – – – – 1,963 1,963
Loans receivables 19,284 24,379 3,740 3,711 11,744 62,858
Unquoted debt securities 1 1 2 16 9,865 9,885
Receivables from SPV – 726 – – – 726
AFS investments 4,773 4,784 972 725 32,707 43,961
HTM investments 179 – – 184 – 363
Total financial assets 61,720 36,770 12,797 7,036 62,184 180,507
Financial Liabilities
Deposit liabilities:
Demand – – – – 19,952 19,952
Savings 51,973 7,692 3,459 1,925 72,246 137,295
Time 14,261 4,474 3,841 1,066 1 23,643
Bills and acceptances payable 1,436 – 351 – 1,687 3,474
Subordinated debt – – – – 8,416 8,416
Other liabilities 320 260 21 – 1,446 2,047
Total financial liabilities 67,990 12,426 7,672 2,991 103,748 194,827
Repricing gap (P6,270 ) P24,344 P5,125 P4,045 (P41,564 ) (P14,320 )
Cumulative gap (6,270 ) 18,074 23,199 27,244 (14,320 )
Note: Non-interest bearing financial assets and liabilities are lumped in greater than 1 year bucket.
 BREAKTHROUGH ON ALL FRONTS 71

2006
Up to 1 to 3 3 to 6 6 to 12 Beyond
1 month months months months 1 year Total
(In Million Pesos)
Financial Assets
COCI P– P– P– P– P4,754 P4,754
Placements with the BSP and other banks 14,591 – – – 290 14,881
Interbank loans receivable 22,094 – – – – 22,094
SPURA 15,700 – – – – 15,700
Financial assets at FVPL:
Derivative assets 961 – – – – 961
Government securities 148 – – – – 148
Loans and receivables 16,456 23,894 3,591 2,946 13,276 60,163
Unquoted debt securities 11,208 323 – – 9,771 21,302
Receivables from SPV – – – – 1,361 1,361
AFS investments 7,232 10,991 1,536 2,892 18,171 40,822
HTM investments – 269 – – 1,151 1,420
Total financial assets 88,390 35,477 5,127 5,838 48,774 183,606
Financial Liabilities
Deposit liabilities:
Demand P– P– P– P– P17,823 P17,823
Savings 41,162 11,306 8,211 10,746 68,661 140,086
Time 14,304 4,824 2,677 4,006 13 25,824
Bills and acceptances payable 7,502 – – – 2,860 10,362
Subordinated debt – – – – 8,389 8,389
Other liabilities 11,182 771 104 47 – 12,104
Total financial liabilities 74,150 16,901 10,992 14,799 97,746 214,588
Repricing Gap P14,240 P18,576 (P5,865 ) (P8,961 ) (P48,972 ) (P30,982 )
Cumulative Gap 14,240 32,816 26,951 17,990 (30,982 )
Note: Non-interest bearing financial assets and liabilities are lumped in greater than 1 year bucket.

The following table sets forth, the impact of changes in interest rates on the Parent Company’s non-consolidated net interest income for the
year ended December 31, 2007:

2007
Changes in interest rates (in basis points) (50 ) (100 ) 50 100
Change on annualized net interest income(1) (110 ) (291 ) 110 291
(1)
In P millions

If interest rates increased by 100 basis points (given the repricing position of the assets and liabilities of the Parent Company as of December
31, 2007), the Parent Company would expect annualized non-consolidated net interest income to increase by P291 million. If interest rates
decreased by 100 basis points, the annualized non-consolidated net interest income would decrease by P291 million. This EaR computation is
accomplished monthly, with a quarterly stress test.

As one of the long-term goals in the risk management process, the Parent Company has set the adoption of the economic value approach in
measuring the interest rate risk in the Banking book to complement the earnings approach currently used.

Foreign Currency Risk

Foreign exchange is the risk to earnings or capital arising from changes in foreign exchange rates. The Group takes on exposure to effects of
fluctuations in the prevailing foreign currency exchange rates on its financial and cash flows.

Foreign currency liabilities generally consist of foreign currency deposits in the Parent Company’s FCDU books, accounts made in the Philippines
or which are generated from remittances to the Philippines by Filipino expatriates and overseas Filipino workers who retain for their own benefit
or for the benefit of a third party, foreign currency deposit accounts with the Parent Company and foreign currency-denominated borrowings
appearing in the regular books of the Parent Company.

Foreign currency deposits are generally used to fund the Parent Company’s foreign currency-denominated loan and investment portfolio in the
FCDU. Banks are required by the BSP to match the foreign currency liabilities with the foreign currency assets held through FCDUs. In addition,
the BSP requires a 30.00% liquidity reserve on all foreign currency liabilities held through FCDUs. Outside the FCDU, the Parent Company has
additional foreign currency assets and liabilities in its foreign branch network.
72 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

The Group’s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory guidelines. The Group
believes that its profile of foreign currency exposure on its assets and liabilities is within conservative limits for a financial institution engaged
in the type of business in which the Group is involved.

The table below summarizes the Group’s exposure to foreign exchange rate risk as of December 31, 2007 and 2006. Included in the table are
the Group’s assets and liabilities at carrying amounts (in million pesos), categorized by currency.

Consolidated
2007 2006
USD Others Total USD Others Total
Assets
COCI and due from BSP P761 P146 P907 P981 P105 P1,086
Due from other banks 1,325 1,105 2,430 1,779 687 2,466
Interbank loans receivable and SPURA 8,807 542 9,349 18,506 410 18,916
Loans and receivables 10,229 21 10,250 10,010 34 10,044
Financial assets at FVPL 63 – 63 108 – 108
AFS investments 24,270 160 24,430 24,953 182 25,135
HTM investments 310 – 310 1,484 – 1,484
Other assets 3,093 42 3,135 3,829 4 3,833
Total assets 48,858 2,016 50,874 61,650 1,422 63,072
Liabilities
Deposit liabilities 37,556 776 38,332 42,737 783 43,520
Bills and acceptances payable 2,159 10 2,169 3,059 – 3,059
Accrued taxes, interest and other expenses 108 1 109 105 1 106
Other liabilities 4,000 473 4,473 5,727 581 6,308
Total liabilities 43,823 1,260 45,083 51,628 1,365 52,993
Net exposure P5,035 P756 P5,791 P10,022 P57 P10,079

Parent Company
2007 2006
USD Others Total USD Others Total
Assets
COCI and due from BSP P761 P146 P907 P981 P105 P1,086
Due from other banks 1,709 1,105 2,814 1,760 707 2,467
Interbank loans receivable and SPURA 8,807 542 9,349 18,506 410 18,916
Loans and receivables 10,229 21 10,250 10,010 34 10,044
Financial assets at FVPL 63 – 63 – – –
AFS investments 24,270 160 24,430 24,953 182 25,135
HTM investments 310 – 310 1,484 – 1,484
Other assets 3,073 42 3,115 3,910 4 3,914
Total assets 49,222 2,016 51,238 61,604 1,442 63,046
Liabilities
Deposit liabilities 37,556 776 38,332 42,737 783 43,520
Bills and acceptances payable 2,159 10 2,169 3,059 – 3,059
Accrued taxes, interest and other expenses 108 1 109 105 1 106
Other liabilities 4,000 473 4,473 5,727 581 6,308
Total liabilities 43,823 1,260 45,082 51,628 1,365 52,993
Net exposure P5,399 P756 P6,156 P9,976 P77 P10,053

Information relating to the Parent Company’s currency derivatives is contained in Note 30. The Parent Company has outstanding foreign
currency spot transactions (in equivalent peso amounts) of P0.8 billion (sold) and P0.2 billion (bought) as of December 31, 2007 and P1.3 billion
(sold) and P0.9 billion (bought) as of December 31, 2006.
 BREAKTHROUGH ON ALL FRONTS 73

Prepayment Risk
Prepayment risk is the risk that the Parent Company will incur a financial loss because its customers and counterparties repay or request
repayment earlier or later than expected, such as fixed rate mortgages when interest rates fall. The Parent Company has exposures in consumer
loans e.g., housing loans, motor vehicles. These activities generate market risk since these loan products are inherently sensitive to changes in
the level of market interest rates. Based on historical data from 2005 to 2007, prepayment received by the Parent Company is less than 1.00%
of the total housing loan and motor vehicle loan portfolio.

6. Financial Instruments and Fair Value Measurement

Shown below are the assets and liabilities of the Group and of the Parent Company as they appear in the balance sheets, which are divided into
financial and non-financial items, with the financial items being mapped to the categories of financial instruments under PAS 39.

Consolidated
2007
Financial instruments
Fair Value Held-to- Available- Other Other
Through Maturity Loans and for-Sale Financial Non-financial
Profit or Loss Investments Receivables Investments Liabilities Items Total
(In Thousand Pesos)
ASSETS
Cash and other cash items P– P– P4,773,212 P– P– P– P4,773,212
Due from BSP – – 27,961,521 – – – 27,961,521
Due from other banks – – 3,962,000 – – – 3,962,000
Interbank loans receivable – – 13,197,201 – – – 13,197,201
SPURA – – 11,200,000 – – – 11,200,000
Financial assets at FVPL 3,215,235 – – – – – 3,215,235
Loans and receivables – – 76,575,031 – – – 76,575,031
Receivable from SPV – – 726,095 – – – 726,095
AFS investments – – – 44,821,522 – – 44,821,522
HTM investments – 446,054 – – – – 446,054
Property and equipment – – – – – 16,503,679 16,503,679
Investments in subsidiaries and an associate – – – – – 665,123 665,123
Investment Properties – – – – – 24,799,602 24,799,602
Deferred tax assets – – – – – 1,857,109 1,857,109
Other assets – – – – – 9,001,656 9,001,656
Total Assets P3,215,235 P446,054 P138,395,060 P44,821,522 P– P52,827,169 P239,705,040
LIABILITIES
Deposit liabilities P– P– P– P– P178,811,969 P– P178,811,969
Bills and acceptances payable – – – – 4,299,094 – 4,299,094
Accrued taxes, interest and other expenses – – – – 2,053,372 2,221,542 4,274,914
Subordinated debt – – – – 8,416,424 – 8,416,424
Other liabilities 67,612 – – – 10,323,541 3,282,368 13,673,521
Total Liabilities P67,612 P– P– P– P203,904,400 P5,503,910 P209,475,922
74 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

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NOTES TO FINANCIAL STATEMENTS

Parent Company
2007
Financial instruments
Fair Value Held-to- Available- Other Other
Through Maturity Loans and for-Sale Financial Non-financial
Profit or Loss Investments Receivables Investments Liabilities Items Total
(In Thousand Pesos)
ASSETS
Cash and other cash items P– P– P4,732,004 P– P– P– P4,732,004
Due from BSP – – 27,961,521 – – – 27,961,521
Due from other banks – – 2,859,908 – – – 2,859,908
Interbank loans receivable – – 12,824,611 – – – 12,824,611
SPURA – – 11,200,000 – – – 11,200,000
Financial assets at FVPL 3,194,086 – – – – – 3,194,086
Loans and receivables – – 73,162,024 – – – 73,162,024
Receivable from SPV – – 726,095 – – – 726,095
AFS investments – – – 43,961,027 – – 43,961,027
HTM investments – 362,795 – – – – 362,795
Property and equipment – – – – – 16,396,382 16,396,382
Investments in subsidiaries and
an associate – – – – – 5,381,139 5,381,139
Investment properties – – – – – 24,723,885 24,723,885
Deferred tax assets – – – – – 1,798,662 1,798,662
Other assets – – – – – 8,842,847 8,842,847
Total Assets P3,194,086 P362,795 P133,466,163 P43,961,027 P– P57,142,915 P238,126,986
LIABILITIES
Deposit liabilities P– P– P– P– P180,890,673 P– P180,890,673
Bills and acceptances payable – – – – 3,474,448 – 3,474,448
Accrued taxes, interest and
other expenses – – – – 2,046,474 2,119,691 4,166,165
Subordinated debt – – – – 8,416,424 – 8,416,424
Other liabilities 67,612 – – – 10,163,426 1,729,217 11,960,255
Total Liabilities P67,612 P– P– P– P204,991,445 P3,848,908 P208,907,965

Consolidated
2006
Financial instruments
Fair Value Held-to- Available- Other Other
Through Maturity Loans and for-Sale Financial Non-financial
Profit or Loss Investments Receivables Investments Liabilities Items Total
(In Thousand Pesos)
ASSETS
Cash and other cash items P– P– P4,820,155 P– P– P– P4,820,155
Due from BSP – – 12,566,759 – – – 12,566,759
Due from other banks – – 3,555,603 – – – 3,555,603
Interbank loans receivable – – 22,412,817 – – – 22,412,817
SPURA – – 15,700,000 – – – 15,700,000
Financial assets at FVPL 1,137,835 – – – – – 1,137,835
Loans and receivables – – 83,592,219 – – – 83,592,219
Receivable from SPV – – 1,361,074 – – – 1,361,074
AFS investments – – – 42,824,810 – – 42,824,810
HTM investments – 1,554,368 – – – – 1,554,368
Property and equipment – – – – – 16,577,000 16,577,000
Investments in subsidiaries and
an associate – – – – – 801,838 801,838
Investment properties – – – – – 24,882,076 24,882,076
Deferred tax assets – – – – – 1,847,258 1,847,258
Other assets – – – – – 9,837,253 9,837,253
Total Assets P1,137,835 P1,554,368 P144,008,627 P42,824,810 P– P53,945,425 P243,471,065
(Forward)
 BREAKTHROUGH ON ALL FRONTS 75

Consolidated
2006
Financial instruments
Fair Value Held-to- Available- Other Other
Through Maturity Loans and for-Sale Financial Non-financial
Profit or Loss Investments Receivables Investments Liabilities Items Total
(In Thousand Pesos)
LIABILITIES
Deposit liabilities P– P– P– P– P181,667,692 P– P181,667,692
Bills and acceptances payable – – – – 10,955,948 – 10,955,948
Accrued taxes, interest and
other expenses – – – – 2,575,054 2,324,373 4,899,427
Subordinated debt – – – – 8,389,297 – 8,389,297
Other liabilities 6,633 – – – 10,167,060 2,628,733 12,802,426
Total Liabilities P6,633 P– P– P– P213,755,051 P4,953,106 P218,714,790

Parent Company
2006
Financial instruments
Fair Value Held-to- Available- Other Other
Through Maturity Loans and for-Sale Financial Non-financial
Profit or Loss Investments Receivables Investments Liabilities Items Total
(In Thousand Pesos)
ASSETS
Cash and other cash items P– P– P4,753,539 P– P– P– P4,753,539
Due from BSP – – 12,566,759 – – – 12,566,759
Due from other banks – – 2,314,288 – – – 2,314,288
Interbank loans receivable – – 22,093,537 – – – 22,093,537
SPURA – – P15,700,000 – – – P15,700,000
Financial assets at FVPL 1,109,137 – – – – – 1,109,137
Loans and receivables – – 81,465,282 – – – 81,465,282
Receivable from SPV – – 1,361,074 – – – 1,361,074
AFS investments – – – 40,822,339 – – 40,822,339
HTM investments – 1,420,044 – – – – 1,420,044
Property and equipment – – – – – 16,510,735 16,510,735
Investments in subsidiaries and
an associate – – – – – 5,439,520 5,439,520
Investment properties – – – – – 24,803,748 24,803,748
Deferred tax assets – – – – – 1,794,291 1,794,291
Other assets – – – – – 9,499,902 9,499,902
Total Assets P1,109,137 P1,420,044 P140,254,479 P40,822,339 P– P58,048,196 P241,654,195

LIABILITIES
Deposit liabilities P– P– P– P– P183,732,964 P– P183,732,964
Bills and acceptances payable – – – – 10,361,715 – 10,361,715
Accrued taxes, interest and
other expenses – – – – 2,579,782 2,244,029 4,823,811
Subordinated debt – – – – 8,389,297 – 8,389,297
Other liabilities 6,633 – – – 9,517,601 1,557,603 11,081,837
Total Liabilities P6,633 P– P– P– P214,581,359 P3,801,632 P218,389,624

The methods and assumptions used by the Group in estimating the fair value of the financial instruments are:

Cash equivalents and short-term investments - Carrying amounts approximate fair values due to the relatively short-term maturity of these
investments.

Debt securities - Fair values are generally based upon quoted market prices. If the market prices are not readily available, fair values are
estimated using either values obtained from independent parties offering pricing services or adjusted quoted market prices of comparable
investments or using the discounted cash flow methodology.
76 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Quoted equity securities - Fair values are based on quoted prices published in markets.

Unquoted equity securities - Fair values could not be reliably determined due to the unpredictable nature of future cash flows and the lack of
suitable methods of arriving at a reliable fair value.

Loans and receivables - For loans with fixed interest rates, fair values are estimated by discounted cash flow methodology, using the Group’s
lending rates for similar types of loans. For loans with floating interest rates, with repricing frequencies on a regular basis, the Group assumes
that the carrying amount approximates fair value. Where the repricing frequency is beyond three months, the fair value of floating rate loans
is determined using the discounted cash flow methodologies.

Liabilities - Fair values of quoted debt instruments are based on quotes obtained from an independent pricing service. For unquoted instruments,
fair values are estimated using the discounted cash flow methodology using the Group’s current incremental borrowing rates for similar
borrowings with maturities consistent with those remaining for the liability being valued. Except for subordinated notes, the carrying values
approximate fair values due to either the presence of a demand feature or the relatively short-term maturities of these liabilities.

Derivative instruments - Fair values are estimated based on quoted market prices, prices provided by independent parties or acceptable
valuation models.

The following tables summarize the carrying amounts and fair values of the financial assets and liabilities as of December 31, 2007:

Consolidated
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Assets
COCI and due from BSP P32,734,733 P– P– P– P32,734,733 P32,734,733
Due from other banks 3,962,000 – – – 3,962,000 3,962,000
Interbank loans receivable 13,197,201 – – – 13,197,201 13,197,201
Securities held under
agreements to resell 11,200,000 – – – 11,200,000 11,200,000
Financial assets at FVPL:
Government securities 1,963,207 1,963,207 – – – 1,963,207
Derivative assets 1,173,297 – 1,173,297 – – 1,173,297
Equity securities 78,731 78,731 – – – 78,731
Loans and receivables:
Business loans 36,640,171 – – 8,754,979 28,309,746 37,064,725
GOCCs and NGAs 11,303,641 – – 241,187 11,050,631 11,291,818
LGUs 5,312,104 – – 8,360 5,304,512 5,312,872
Unquoted debt securities 8,304,396 4,806,436 4,239,219 9,045,655
Consumers 3,954,387 – – 1,163,745 2,887,254 4,050,999
Fringe benefits 858,573 – – 760,202 98,371 858,573
Others 10,201,759 – – 2,393,289 8,253,429 10,646,718
Receivables from SPV 726,095 – – – 726,095 726,095
AFS investments:
Government securities 32,310,169 32,190,796 – 119,373 – 32,310,169
Other debt securities 11,767,435 438,132 9,172,819 2,156,484 – 11,767,435
Equity securities 743,918 421,787 – – 322,130 743,917
HTM investments:
Government securities 446,054 450,433 – – – 450,433
(Forward)
 BREAKTHROUGH ON ALL FRONTS 77

Consolidated
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Liabilities
Deposit liabilities:
Demand P 20,167,642 P– P– P– P20,167,642 P20,167,642
Savings 137,315,472 – – – 137,315,472 137,315,472
Time 21,328,855 – – – 21,328,855 21,328,855
Bills and acceptances payable:
BSP and local bank 2,456,145 – – – 2,456,145 2,456,145
Foreign banks 1,002,912 – – – 1,002,912 1,002,912
PDIC and others 420,530 – – – 420,530 420,530
Acceptances outstanding 419,507 – – – 419,507 419,507
Subordinated debt 8,416,424 – – 9,265,602 – 9,265,602
Accrued interest payable 2,053,372 – – – 2,053,372 2,053,372
Other liabilities 10,391,153 – 67,612 – 10,323,541 10,391,153

Parent Company
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Assets
COCI and due from BSP P32,693,525 P– P– P– P32,693,525 P32,693,525
Due from other banks 2,859,908 – – – 2,859,908 2,859,908
Interbank loans receivable 12,824,611 – – – 12,824,611 12,824,611
Securities held under
agreements to resell 11,200,000 – – – 11,200,000 11,200,000
Financial assets at FVPL:
Government securities 1,963,207 1,963,207 – – – 1,963,207
Derivative assets 1,173,297 – 1,173,297 – – 1,173,297
Equity securities 57,582 57,582 – – – 57,582
Loans and receivables:
Business loans 35,299,961 – – 8,754,979 27,112,334 35,867,313
GOCCs and NGAs 11,303,641 – – 241,187 11,050,631 11,291,818
LGUs 5,312,104 – – 8,360 5,304,512 5,312,872
Unquoted debt securities 8,304,396 4,806,436 4,239,219 9,045,665
Consumers 3,719,148 – – 1,028,834 2,711,378 3,740,212
Fringe benefits 858,573 – – 760,202 98,371 858,573
Others 8,364,201 – – 2,393,289 6,349,876 8,743,165
Receivables from SPV 726,095 – – – 726,095 726,095
AFS investments:
Government securities 31,712,872 31,714,279 – – – 31,714,279
Other debt securities 11,584,565 256,233 9,169,641 2,156,484 – 11,582,358
Equity securities 664,390 344,760 – – 319,630 664,390
HTM investments:
Government securities 362,795 366,581 – – – 366,851
(Forward)
78 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Parent Company
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Liabilities
Deposit liabilities:
Demand P19,952,002 P– P– P– P19,952,002 P19,952,002
Savings 137,295,678 – – – 137,295,678 137,295,678
Time 23,642,993 – – – 23,642,993 23,642,993
Bills and acceptances payable:
BSP and local bank 1,748,311 – – – 1,748,311 1,748,311
Foreign banks 768,099 – – – 768,099 768,099
PDIC and others 538,531 – – – 538,531 538,531
Acceptances outstanding 419,507 – – – 419,507 419,507
Subordinated debt 8,416,424 – – 9,265,607 – 9,265,607
Accrued interest payable 2,046,474 – – – 2,046,474 2,046,474
Other liabilities 10,231,038 – 67,612 – 10,163,426 10,231,038

The following tables summarize the carrying amounts and fair values of the financial assets and liabilities as of December 31, 2006:

Consolidated
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Assets
COCI and due from BSP P17,386,914 P– P– P– P17,386,914 P17,386,914
Due from other banks 3,555,603 – – – 3,555,603 3,555,603
Interbank loans receivable 22,412,817 – – – 22,412,817 22,412,817
Securities held under
agreements to resell 15,700,000 – – – 15,700,000 15,700,000
Financial assets at FVPL:
Derivative assets 961,067 – 961,067 – – 961,067
Government securities 148,070 148,070 – – – 148,070
Equity securities 28,698 28,698 – – – 28,698
Loans and receivables:
Business loans 32,013,423 – – 7,815,571 23,704,956 31,520,527
GOCCs and NGAs 14,198,097 – – 2,019 14,195,837 14,197,856
LGUs 4,667,479 – – – 4,667,479 4,667,479
Consumers 3,244,321 – – 908,407 2,486,521 3,394,928
Fringe benefits 738,049 – – 426,702 90,264 516,966
Unquoted debt securities 19,519,655 3,967,563 15,534,780 19,502,343
Others 9,211,195 – – – 9,211,195 9,211,195
Receivables from SPV 1,361,074 – – – 1,361,074 1,361,074
AFS investments:
Government securities 28,225,866 26,422,845 – 1,803,021 – 28,225,866
Other debt securities 13,732,557 5,125,262 8,407,413 199,882 – 13,732,557
Equity securities 866,387 333,125 – – 533,262 866,387
HTM investments:
Government securities 1,485,616 1,692,927 – – – 1,692,927
Other debt securities 68,752 26,317 – – – 26,317
(Forward)
 BREAKTHROUGH ON ALL FRONTS 79

Consolidated
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Liabilities
Deposit liabilities:
Demand P17,867,651 P– P– P– P17,867,651 P17,867,651
Savings 140,233,120 – – – 140,233,120 140,233,120
Time 23,566,921 – – – 23,566,921 23,566,921
Bills and acceptances payable:
BSP and local bank 2,571,515 – – – 2,571,515 2,571,515
Foreign banks 1,425,893 – – – 1,425,893 1,425,893
PDIC and others 6,548,580 – – – 6,548,580 6,548,580
Acceptances outstanding 409,960 – – – 409,960 409,960
Subordinated debt 8,389,297 – – 9,588,439 – 9,588,439
Accrued interest payable 2,575,054 – – – 2,575,054 2,575,054
Other liabilities 10,173,693 – 6,633 – 10,167,060 10,173,693

Parent Company
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Assets
COCI and due from BSP P17,320,298 P– P– P– P17,320,298 P17,320,298
Due from other banks 2,314,288 – – – 2,314,288 2,314,288
Interbank loans receivable 22,093,537 – – – 22,093,537 22,093,537
Securities held under
agreements to resell 15,700,000 – – – 15,700,000 15,700,000
Financial assets at FVPL:
Derivative assets 961,067 – 961,067 – – 961,067
Government securities 148,070 148,070 – – – 148,070
Loans and receivables:
Business loans 30,630,776 – – 6,664,637 23,541,416 30,206,053
GOCCs and NGAs 14,198,097 – – 2,019 14,195,837 14,197,856
LGUs 4,667,479 – – – 4,667,479 4,667,479
Consumers 2,949,885 – – 908,407 2,192,084 3,100,491
Fringe benefits 732,898 – – 426,702 85,113 511,815
Unquoted debt instruments 19,519,655 – – 3,967,563 15,534,780 19,502,343
Others 8,766,492 – – – 8,766,492 8,766,492
Receivables from SPV 1,361,074 – – – 1,361,074 1,361,074
AFS investments:
Government securities 26,516,171 25,109,206 – 1,406,965 – 26,516,171
Other debt securities 13,506,146 – 11,571,417 1,934,729 – 13,506,146
Equity securities 800,022 269,260 – – 530,762 800,022
HTM investments:
Government securities 1,420,044 1,584,920 – – – 1,584,920
(Forward)
80 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Parent Company
Fair Market Value
Valuation Valuation
Quoted Technique Technique
Carrying Market (Market (Market Non-
Value Price Observable) observable) Cost Total
(In Thousand Pesos)
Financial Liabilities
Deposit liabilities:
Demand P17,823,367 P– P– P– P17,823,367 P17,823,367
Savings 140,085,759 – – – 140,085,759 140,085,759
Time 25,823,838 – – – 25,823,838 25,823,838
Bills and acceptances payable:
BSP and local bank 2,072,515 – – – 2,072,515 2,072,515
Foreign banks 1,140,888 – – – 1,140,888 1,140,888
PDIC and others 6,738,352 – – – 6,738,352 6,738,352
Acceptances outstanding 409,960 – – – 409,960 409,960
Subordinated debt 8,389,297 – – 9,588,439 – 9,588,439
Accrued interest payable 2,579,782 – – – 2,579,782 2,579,782
Other liabilities 9,524,434 – 6,633 – 9,517,601 9,524,434

The discount rates used in estimating the fair value of loans and receivables ranges from 6.50% to 12.00% in 2007 and 7.94% to 12.00%
in 2006.

7. Segment Information

Business Segments
The Group’s operating businesses are determined and managed separately according to the nature of services provided and the different
markets served with each segment representing a strategic business unit. The Group’s business segments follow:

Retail Banking - principally handling individual customer’s deposits, and providing consumer type loans, credit card facilities and fund transfer
facilities

Corporate Banking - principally handling loans and other credit facilities and deposit accounts for corporate and institutional customers

Treasury - principally providing money market, trading and treasury services, as well as the management of the Group’s funding operations by
use of T-bills, government securities and placements and acceptances with other banks, through treasury and wholesale banking

These segments are the bases on which the Group reports its primary segment information. Other operations of the Group comprise of the
operations and financial control groups. Transactions between segments are conducted at estimated market rates on an arm’s length basis.
Interest is credited to or charged against business segments based on a pool rate which approximates the marginal cost of funds.
 BREAKTHROUGH ON ALL FRONTS 81

Business segment information of the Group follows (amounts in thousand pesos):

2007
Retail Banking Corporate Banking Treasury Others Total
Gross income P3,272,399 P6,946,369 P7,396,271 P2,246,218 P19,861,257
Segment result P1,363,031 P2,068,703 P2,318,296 P501,946 P6,251,976
Unallocated expenses 4,144,014
Income before tax 2,107,962
Provision for income tax (609,512 )
Minority interest (8,293 )
Net income for the year attributable to equity
holders of the Parent Company P1,490,157
Other Information
Segment assets P25,584,199 P81,660,513 P88,021,554 P40,669,227 P235,935,493
Unallocated assets 3,769,547
Total assets P239,705,040
Segment liabilities P116,046,872 P25,577,424 P54,121,499 P10,997,390 P206,743,185
Unallocated liabilities 2,732,737
Total liabilities P209,475,922
Other Segment Information
Capital expenditures P167,132 P6,616 P657 P9,829 P184,234
Unallocated capital expenditures 362,953
Total capital expenditures P547,187
Depreciation and amortization P157,606 P351,913 P8,015 P14,887 P532,421
Unallocated depreciation and amortization 617,893
Total depreciation and amortization P1,150,314
Provision for impairment and credit losses P3,280,875

2006
Retail Banking Corporate Banking Treasury Others Total
Gross income P3,153,057 P5,964,411 P9,272,896 P1,782,615 P20,172,979
Segment result P744,233 P1,524,341 P3,008,677 P356,997 P5,634,248
Unallocated expenses 3,881,540
Income from operations before tax 1,752,708
Provision for income tax (932,679 )
Minority interest (5,594 )
Net income for the year attributable to equity
holders of the Parent Company P814,435
Other Information
Segment assets P29,588,781 P70,393,516 P80,011,081 P31,342,309 P211,335,687
Unallocated assets 32,135,378
Total assets P243,471,065
Segment liabilities P26,305,449 P62,582,268 P71,132,617 P27,864,396 P187,884,730
Unallocated liabilities 30,830,060
Total liabilities P218,714,790
Other Segment Information
Capital expenditures P272,729 P6,144 P380 P24,370 P303,623
Unallocated capital expenditures 214,551
Total capital expenditures P518,174
Depreciation and amortization P273,198 P373,412 P14,876 P47,700 P709,186
Unallocated depreciation and amortization 402,178
Total depreciation and amortization P1,111,364
Provision for impairment and credit losses P2,802,283
82 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

2005
Retail Banking Corporate Banking Treasury Others Total
Gross income P3,253,014 P5,700,770 P6,593,889 P2,002,811 P17,550,484
Segment result P1,895,821 P824,859 P2,264,326 P805,175 P5,790,181
Unallocated expenses 3,270,917
Income from operations before tax 2,519,264
Provision for income tax (1,891,726)
Minority interest (6,617)
Net income for the year attributable to equity
holders of the Parent Company P620,921
Other Information
Segment assets P31,222,190 P78,238,539 P67,164,137 P26,468,019 P203,092,885
Unallocated assets 19,565,365
Total assets P222,658,250
Segment liabilities P27,783,779 P69,622,352 P59,767,542 P23,553,171 P180,726,844
Unallocated liabilities 19,022,134
Total liabilities P199,748,978
Other Segment Information
Capital expenditures P259,386 P8,519 P2,044 P30,743 P300,692
Unallocated capital expenditures 215,198
Total capital expenditures P515,890
Depreciation and amortization P181,717 P9,997 P41,540 P10,664 P243,918
Unallocated depreciation and amortization 556,534
Total depreciation and amortization P800,452
Provision for impairment and credit losses P504,213

Geographical Segments
Although the Group’s businesses are managed on a worldwide basis, the Group operates in five (5) principal geographical areas of the world.
The distribution of assets, liabilities, credit commitments items and revenues by geographic region of the Group as of December 31, 2007 and
2006 follows (amounts in thousand pesos):

Assets Liabilities Credit Commitments Revenues

2007 2006 2007 2006 2007 2006 2007 2006
Philippines P229,728,831 P230,693,390 P200,877,990 P208,345,788 P9,379,970 P8,299,916 P17,822,127 P17,767,691
Asia (excluding
Philippines) 5,626,513 6,572,548 5,505,600 6,373,945 371,413 1,706,168 766,395 895,672
USA and Canada 2,813,821 4,093,909 2,166,554 2,486,008 31,837 37,640 987,999 1,248,935
United Kingdom 1,140,063 1,257,561 577,187 712,116 90 5,021 177,861 172,822
Other European Union
Countries 395,812 853,657 348,591 796,933 – – 106,875 87,859
P239,705,040 P243,471,065 P209,475,922 P218,714,790 P9,783,310 P10,048,745 P19,861,257 P20,172,979

The Philippines is the home country of the Parent Company, which is also the main operating company. The Group offers a wide range of
financial services as discussed in Note 1. Additionally, most of the remittance services are managed and conducted in Asia, Canada, USA and
United Kingdom.

The areas of operations include all the primary business segments.

 BREAKTHROUGH ON ALL FRONTS 83

8. Financial Assets at Fair Value Through Profit or Loss

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Government securities P1,963,207 P148,070 P1,963,207 P148,070
Derivative assets (Note 30) 1,173,297 961,067 1,173,297 961,067
Equity securities 78,731 28,698 57,582 –
P3,215,235 P1,137,835 P3,194,086 P1,109,137

Government securities include unrealized loss of P9.4 million and P1.1 million as of December 31, 2007 and 2006, respectively, for the Group
and the Parent Company.

For the years ended December 31, 2007 and 2006, the effective interest rates of government securities range from 6.26% to 10.63% and
4.10% to 9.65%, respectively.

Equity securities include unrealized gain of P3.5 million and P1.0 million as of December 31, 2007 and 2006, respectively, for the Group.

9. Loans and Receivables

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Loans receivables:
Loans and discounts P57,038,829 P55,533,021 P56,256,936 P54,643,968
Bills purchased 4,168,527 3,003,647 4,168,527 3,003,647
Customers’ liabilities on acceptances,
letters of credit and trust receipts 1,873,498 2,078,947 1,873,498 2,078,947
Lease contracts receivable 1,148,977 1,002,423 – –
Credit card accounts 558,624 569,915 558,624 569,915
64,788,455 62,187,953 62,857,585 60,296,477
Less unearned and other deferred income 492,963 543,861 354,725 431,438
64,295,492 61,644,092 62,502,860 59,865,039
Unquoted debt securities 9,885,248 21,301,724 9,885,248 21,301,724
Other receivables:
Accrued interest receivable 5,958,476 5,952,681 5,930,497 5,914,611
Accounts receivable 4,592,332 5,233,271 3,697,554 4,926,892
Sales contract receivables 2,113,878 2,110,298 2,113,878 2,110,298
Miscellaneous 1,695,893 847,376 715,097 617,521
14,360,579 14,143,626 12,457,026 13,569,322
88,541,319 97,089,442 84,845,134 94,736,085
Less allowance for credit losses (Note 16) 11,966,288 13,497,223 11,683,110 13,270,803
P76,575,031 P83,592,219 P73,162,024 P81,465,282

As of December 31, 2007 and 2006, 82.59% and 57.48%, respectively, of the total loans receivables of the Parent Company were subject
to periodic interest repricing. Remaining receivables carry annual fixed interest rates ranging from 8.65% to 13.26% in 2007 and 5.25% to
13.26% in 2006 for foreign currency-denominated receivables, and from 5.00% to 22.00% in 2007 5.75% to 22.75% in 2006 for peso-
denominated receivables.
84 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Sales contract receivables bear fixed interest rate per annum of 0.58% to 26.00% in 2007 and 0.58% to 21% in 2006.

The effective interest rates of ‘Loans receivable’, ‘Unquoted debt instruments’ and ‘Sales contract receivables’ range from 5.43% to 10.68%
in 2007 and 5.67% to 10.69% in 2006 for foreign currency-denominated receivables, and from 3.29% to 18.29% in 2007 and 5.51% to
18.84% in 2006 for peso-denominated receivables.

BSP Circular 520 dated March 20, 2006 requires that the difference between the selling price and the carrying value of investment properties
sold under installment should be recognized in profit or loss at the date of sale. Accordingly, the Parent Company reversed the outstanding
deferred income and credits representing the unrealized gain on sale of investment properties amounting to P750.0 million and credited to the
beginning balance of deficit, net of deferred income tax amounting to P225.0 million.

In 2004, the Parent Company sold the outstanding loans receivable of P5.3 billion from National Steel Corporation (NSC) to SPV companies
under the provisions of RA No. 9182. In consideration for such sale, the Parent Company received zero-coupon notes and cash totaling P4.2
billion. In accordance with the BSP Memorandum dated February 16, 2004, Accounting Guidelines on the Sale of Nonperforming Assets (NPAs)
to Special Purpose Vehicles, the P1.6 billion allowance for impairment losses previously provided for the NSC loans receivable was released by
the Parent Company to cover additional allowance for credit and impairment losses required for other existing NPAs and other risk assets of
the Parent Company. With the release of such allowance, the loss on the sale of the NSC loans receivable to the SPV amounting to P1.1 billion
representing the difference between the carrying value of the receivables and consideration received was deferred by the Parent Company as
allowed under the regulations issued by the BSP for banks and financial institutions availing of the provisions of RA No. 9182 (see Note 15).

Unquoted debt instruments include the zero-coupon notes received by the Parent Company on October 15, 2004, as discussed above, at
the principal amount of P803.5 million (Tranche A Note) payable in five (5) years and at the principal amount of P3.4 billion (Tranche B Note)
payable in eight (8) years in exchange for the outstanding loans receivable from NSC of P5.3 billion. The notes are secured by a first ranking
mortgage and security interest over the NSC plant assets. As of December 31, 2007 and 2006, these notes had a carrying value of P2.7 billion
and P2.2 billion, respectively.

In 2005, the Parent Company sold another pool of NPL with outstanding balance of P4.7 billion. Upon adoption of PAS 39 on January 1, 2005,
the Parent Company did not set up allowance for credit losses on the NPLs sold to SPV since it availed of the provisions of RA No. 9182 in the
recognition of the loss from sale of P4.3 billion (see Note 15). This loss was deferred and amortized over 10 years.

In 2006, the Parent Company entered into a sale and purchase agreement for the sale of certain NPLs and foreclosed properties booked under
‘Investment properties’. The loss on sale amounting to P1.9 billion was deferred and amortized over 10 years as allowed under RA No. 9182.
As part of this sale and purchase agreement, another pool of NPLs was sold in 2007. As allowed by the regulatory accounting policies
prescribed by the BSP for banks and financial institutions availing of the provisions of RA No. 9182, the additional required allowance for credit
losses on these NPLs amounting to P1.3 billion was not recognized in the financial statements as of December 31, 2006 since upon sale in
March 2007, the loss was deferred and amortized over 10 years (see Notes 10 and 15).

Under RA No. 9182, losses on sale of NPL to SPV companies can be amortized over 10 years based on the following schedule:

Cumulative Write-down of
End of Period From Date of Transaction Deferred Charges
Year 1 5%
Year 2 10%
Year 3 15%
Year 4 25%
Year 5 35%
Year 6 45%
Year 7 55%
Year 8 70%
Year 9 85%
Year 10 100%

For the purpose of computing the Parent Company’s regular corporate income tax, the loss is treated as an ordinary loss and will be carried over
as a deduction from the Parent Company’s taxable income for five consecutive taxable years immediately following the year of sale.
 BREAKTHROUGH ON ALL FRONTS 85

Had the impairment losses been charged against operations as required by PFRS, deferred charges and equity would have decreased by
P7.7 billion as of December 31, 2007 and deferred charges and equity would have decreased by P6.9 billion and P8.2 billion, respectively, and
allowance for credit losses would have increased by P1.3 billion as of December 31, 2006. The 2006 net income would have decreased by
P3.2 billion and 2005 net income would have increased by P124.8 million.

For the years ended December 31, 2007, 2006 and 2005, the amortization of the loss on sale of NPAs amounting to P413.9 million,
P267.9 million and P54.0 million, respectively, was charged to deficit.

As discussed in Note 10, as allowed by the BSP regulatory reporting rules, the Group did not consolidate the accounts of the SPV that acquired
the NPAs sold in 2007 and 2006. PFRS requires such consolidation.

Unquoted debt instruments also include the following securities:

a. Twelve-year peso-denominated bonds with face value amounting to P11.2 billion. These bonds, with an original amount of P24.3 billion,
were issued by the NG in settlement of the Parent Company’s claims from NG. These bonds, P1.0 billion and P10.2 billion which matured
on July 1, 2007 and August 1, 2007, respectively, were eligible as part of the liquidity cover requirements on government deposits.

As of December 31, 2006, these bonds were pledged as collateral to secure the Parent Company’s borrowing from PDIC (see Note 18).

b. Bonds issued by Philippine Sugar Corporation (PSC) amounting to P2.8 billion. The bonds carry an annual interest rate of 4.00% and will
mature in 2014. The full repayment of principal and accumulated interest to maturity is guaranteed by a sinking fund managed by the
Parent Company’s Trust Banking Group (TBG). As of December 31, 2007 and 2006, the net asset value of the sinking fund amounted to
P4.1 billion and P3.9 billion, respectively, earning an average rate of return of 7.77% per annum. Management expects that the value of
the sinking fund in the year 2014 will be more than adequate to cover the full redemption value of PSC bonds.

On November 27, 1997, Maybank Philippines, Inc. (Maybank) and the Parent Company signed a deed of assignment transferring to the Parent
Company certain Maybank assets (included under ‘Accounts receivables’) and liabilities amounting to P1.9 billion and P1.3 billion, respectively,
in connection with the sale of the Parent Company’s 60.00% equity in Maybank. As of December 31, 2007 and 2006, the balance of these
receivables amounting to P1.7 billion and P2.0 billion, respectively, which is included under ‘Loans and receivables’, may be offset against the
equivalent amount of transferred liabilities (included under ‘Bills payable to BSP and local banks’ - see Note 18). The excess of the transferred
receivables over the transferred liabilities is fully covered by an allowance for credit losses amounting to P39.3 million and P40.9 million as of
December 31, 2007 and 2006, respectively. The remaining equity ownership of the Parent Company in Maybank was sold in June 2000 (see
Note 29).

Miscellaneous receivables include assets previously transferred to the NG as part of the Parent Company’s rehabilitation in 1986. These
receivables were repurchased by the Parent Company in 1992 from the NG at a discount and are mostly secured by real estate mortgages.
These receivables are likewise fully covered by allowance for credit losses amounting to P147.4 million and P172.6 million as of
December 31, 2007 and 2006, respectively.

BSP Reporting
The information relating to loans receivables as to secured and unsecured and as to collateral follows:

Consolidated
2007 2006
Amount % Amount %
( In Thousand Pesos)
Secured:
Real estate mortgage P21,148,948 32.64 P24,094,623 38.74
Chattel mortgage 3,484,198 5.38 3,313,479 5.33
Bank deposit hold-out 967,825 1.49 1,413,766 2.27
Shares of stocks 588,506 0.91 1,218,750 1.96
Others 1,707,473 2.64 6,708,757 10.79
27,896,950 43.06 36,749,375 59.09
Unsecured 36,891,505 56.94 25,438,578 40.91
P64,788,455 100.00 P62,187,953 100.00
86 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Parent Company
2007 2006
Amount % Amount %
(In Thousand Pesos)
Secured:
Real estate mortgage P21,088,999 33.55 P24,015,647 39.83
Chattel mortgage 1,963,517 3.12 2,643,098 4.38
Bank deposit hold-out 866,343 1.38 1,319,105 2.19
Shares of stocks 588,506 0.94 1,218,750 2.02
Others 1,706,302 2.71 5,848,232 9.70
26,213,667 41.70 35,044,832 58.12
Unsecured 36,643,918 58.30 25,251,645 41.88
P62,857,585 100.00 P60,296,477 100.00

NPLs as to secured and unsecured follows:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Secured P6,403,140 P7,436,035 P6,377,317 P7,436,035
Unsecured 3,923,583 4,860,651 3,766,084 4,702,983
P10,326,723 P12,296,686 P10,143,401 P12,139,018

Generally, NPLs refer to loans whose principal and/or interest is unpaid for thirty (30) days or more after due date or after they have become
past due in accordance with existing BSP rules and regulations. This shall apply to loans payable in lump sum and loans payable in quarterly,
semi-annual, or annual installments, in which case, the total outstanding balance thereof shall be considered nonperforming.

In the case of loans that are payable in monthly installments, the total outstanding balance thereof shall be considered nonperforming when
three (3) or more installments are in arrears.

In the case of loans that are payable in daily, weekly, or semi-monthly installments, the total outstanding balance thereof shall be considered
nonperforming at the same time that they become past due in accordance with existing BSP regulations, i.e., the entire outstanding balance of
the receivable shall be considered as past due when the total amount of arrearages reaches ten percent (10.00%) of the total loan balance.

Loans are classified as nonperforming in accordance with BSP regulations, or when, in the opinion of management, collection of interest
or principal is doubtful. Loans are not reclassified as performing until interest and principal payments are brought current or the loans are
restructured in accordance with existing BSP regulations, and future payments appear assured.

Loans which do not meet the requirements to be treated as performing loans shall also be considered as NPLs. Current banking regulations
allow banks that have no unbooked valuation reserves and capital adjustments to exclude from nonperforming classification those loans
classified as Loss in the latest examination of the BSP which are fully covered by allowance for credit losses, provided that interest on said
receivables shall not be accrued.

The details of the NPL of the Group and the Parent Company follow:

Consolidated Parent Company

2007 2006 2007 2006
( In Thousand Pesos)
Total NPL P10,326,723 P12,296,686 P10,143,401 P12,139,018
Less NPL fully covered by allowance for credit losses 1,324,255 2,117,804 1,176,196 1,974,600
P9,002,468 P10,178,882 P8,967,205 P10,164,418

Most of these loans are secured mainly by real estate or chattel mortgages.
 BREAKTHROUGH ON ALL FRONTS 87

Restructured loans of the Group and the Parent Company as of December 31, 2007 and 2006 amounted to P9.6 billion and P14.5 billion,
respectively.

Interest income on loans and receivables for the years ended December 31, 2007 and 2006 consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Loans and receivable P4,929,802 P5,238,176 P5,266,830 P4,742,998 P5,052,686 P5,044,678
Interbank loans receivables 848,798 1,106,984 990,994 848,798 1,106,984 990,994
Unquoted debt instruments 412,351 802,352 82,567 412,351 802,352 82,567
P6,190,951 P7,147,512 P6,340,391 P6,004,147 P6,962,022 P6,118,239

Interest income accrued on impaired loans and receivable amounted to P436.15 million and P932.5 million for the years ended
December 31, 2007 and 2006, respectively.

10. Receivables from Special Purpose Vehicle

Receivables from SPV represent the present value of the note received by the Parent Company from the sale of the first pool of NPAs to an SPV
on December 29, 2006. The asset sale and purchase agreements (ASPA) were executed on December 19, 2006. The BSP issued the certificate
of eligibility on January 31, 2007. However, the BSP confirmed that this transaction qualified as a true sale under RA No. 9182 and that the
NPAs may be derecognized already from its books as of December 31, 2006.

The more significant terms of the sale are as follows:

a. Certain NPAs of the Parent Company will be sold to the SPV and divided into two pools. The sale of the first pool of NPAs with an
outstanding balance of P11.7 billion was made on December 29, 2006 for a total consideration of P11.7 billion. The sale of the second
pool was completed on March 30, 2007 for a total consideration of P7.6 billion.

b. The agreed purchase price of the first pool of NPAs shall be paid as follows:

i. An initial amount of P1.1 billion (included in ‘Accounts receivable’ as of December 31, 2006), which was received in full and
acknowledged by the Parent Company on February 14, 2007; and

ii. The balance of P10.6 billion, through issuance of SPV Notes, shall be paid over five (5) years based on a cash flow waterfall arrangement
and at an interest equivalent to the 3-month MART prevailing as of the end of the quarter prior to the payment date.

As of December 31, 2007, Receivables from SPV is net of allowance for credit losses amounting to P683.0 million (see Note 16).

The Parent Company availed of the incentives provided under RA No. 9182 in the recognition of loss from the sale amounting to P1.9 billion
(included in deferred charges under ‘Other assets’). Under RA No. 9182, the loss on sale of NPAs to SPV companies can be amortized over 10
years (see Note 9).

Under the ASPA, the sale of the second pool of NPAs amounting to P7.6 billion with allowance for credit losses of P5.5 billion became effective
in March 2007. The BSP confirmed in its letter dated February 28, 2007 that these NPAs qualify as a true sale under RA No. 9182 as of
December 31, 2006. The agreed purchase price of this pool of NPAs shall be paid as follows:

a. An initial amount of P751.1 million which was received in full and acknowledged by the Parent Company on April 26, 2007; and

b. The balance of P6.8 billion through issuance of SPV Notes, shall be paid over five (5) years based on a cash flow waterfall arrangement
and at an interest equivalent to the 3-month MART prevailing as of the end of the quarter prior to the payment date.
88 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

As discussed in Note 9, since the Parent Company again availed of the incentives mentioned above, the loss amounting to P1.3 billion was
amortized over 10 years. The sale of the NPAs to the SPV qualified for derecognition under BSP regulatory reporting rules. However, PFRS
requires that the accounts of the SPV that acquired the NPA of the Parent Company should be consolidated into the Group’s accounts. Had
the accounts of the SPV been consolidated into the Group’s accounts, total assets and liabilities would have increased by P2.0 billion and
P1.9 billion, respectively, and minority interest in equity of consolidated entities would have decreased by P28.8 million as of December 31, 2007.
As of December 31, 2006, total assets and minority interest in equity of consolidated entities would have increased by P30.0 million.

11. Investment Securities

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
AFS investments:
Government securities (Notes 17 and 27) P32,310,169 P28,225,866 P31,712,072 P26,516,171
Other debt securities 11,767,435 13,732,557 11,584,565 13,506,146
Equity securities - net of allowance for credit losses
of P619.4 million and P445.4 million in 2007 and
2006, respectively (Notes 15 and 16) 743,918 866,387 664,390 800,022
44,821,522 42,824,810 43,961,027 40,822,339
HTM investments:
Government securities (Note 27) 446,054 1,485,615 362,795 1,351,291
Other debt securities – 68,753 – 68,753
446,054 1,554,368 362,795 1,420,044
P45,267,576 P44,379,178 P44,323,822 P42,242,383

Unquoted AFS equity securities as of December 31, 2007 and 2006 amounted to P322.1 million and P533.3 million, respectively, for the Group
and P319.6 million and P530.8 million, respectively, for the Parent Company.

Unrealized gain on AFS investments amounted to P888.8 million and P809.8 million as of December 31, 2007 for the Group and the Parent
Company, respectively. Unrealized gain on AFS investments amounted to P862.2 million and P819.8 million as of December 31, 2006 for the
Group and the Parent Company, respectively.

Effective interest rates range from 3.90% to 11.85% and 3.39% to 9.28% for peso-denominated and foreign currency-denominated AFS
investments, respectively, for the year ended December 31, 2007. Effective interest rates range from 4.50% to 17.58% and 3.33% to 9.17%
for peso-denominated and foreign currency-denominated AFS investments, respectively, for the year ended December 31, 2006.

Effective interest rates range from 10.38% and 5.81% to 6.49% for peso-denominated and foreign currency-denominated HTM investments,
respectively, for the year ended December 31, 2007. Effective interest rate for peso-denominated HTM investments is 7.75% and ranges from
5.19% to 8.87% for foreign currency-denominated HTM investments for the year ended December 31, 2006.

Interest income on trading and investment securities for the years ended December 31, 2007, 2006 and 2005 consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
AFS investments P2,864,562 P2,756,421 P2,859,362 P2,778,947 P2,584,733 P2,777,502
Financial assets at FVPL 806,872 1,102,862 654,304 806,872 1,102,862 654,304
HTM investments 82,551 365,552 632,290 82,552 365,551 632,290
P3,753,985 P4,224,835 P4,145,956 P3,668,371 P4,053,146 P4,064,096
 BREAKTHROUGH ON ALL FRONTS 89

Trading and investment securities gains - net for the years ended December 31, 2007, 2006 and 2005 consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
AFS investments P1,032,205 P1,024,925 P784,113 P1,031,780 P1,024,476 P783,042
Derivatives 103,437 929,503 169,308 103,437 929,503 169,308
Financial assets at FVPL (47,200 ) 117,195 132,316 (107,306 ) 93,042 115,630
P1,088,442 P2,071,623 P1,085,737 P1,027,911 P2,047,021 P1,067,980

The movements of net unrealized gains (losses) are as follows:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Balance at the beginning of the year P875,740 P917,420 P819,765 P868,720
Unrealized gains recognized in equity 1,049,038 983,245 1,021,819 975,521
Realized gains (1,032,205 ) (1,024,925 ) (1,031,780 ) (1,024,476 )
Balance at end of the year P892,573 P875,740 P809,804 P819,765

In view of the increased risk-weights of foreign currency denominated national government bonds under the new risk-based capital adequacy
framework (BSP Circular 538), BSP and PAS 39 allow banks to reclassify their portfolio booked under HTM investments to AFS investments and
be exempted from the “tainting rule” provision. The Parent Company has transferred a total of $23.0 million worth of ROP bonds from HTM
investments to AFS investments in February 2007.

12. Property and Equipment

The composition of and changes in furniture, fixtures and equipment and leasehold improvements follow:

Consolidated
2007
Furniture,
Fixtures and Leasehold
Equipment Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P2,603,625 P223,391 P2,827,016
Additions 503,882 33,010 536,892
Disposals (344,646 ) (24,929 ) (369,575 )
Balance at end of year 2,762,861 231,472 2,994,333
Accumulated Depreciation and Amortization
Balance at beginning of year 1,975,338 121,497 2,096,835
Depreciation and amortization 204,694 30,823 235,517
Disposals (142,443 ) (17,386 ) (159,829 )
Balance at end of year 2,037,589 134,934 2,172,523
Net Book Value at End of Year P725,272 P96,538 P821,810
90 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Consolidated
2006
Furniture,
Fixtures and Leasehold
Equipment Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P3,130,447 P176,822 P3,307,269
Additions 309,316 27,257 336,573
Disposals/others (836,138 ) 19,312 (816,826 )
Balance at end of year 2,603,625 223,391 2,827,016
Accumulated Depreciation and Amortization
Balance at beginning of year 2,437,301 81,091 2,518,392
Depreciation and amortization 200,913 18,681 219,594
Disposals/others (662,876 ) 21,725 (641,151 )
Balance at end of year 1,975,338 121,497 2,096,835
Net Book Value at End of Year P628,287 P101,894 P730,181

Parent Company
2007
Furniture,
Fixtures and Leasehold
Equipment Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P2,391,005 P140,157 P2,531,162
Additions 441,832 21,243 463,075
Disposals/others (309,152 ) (702 ) (309,854 )
Balance at end of year 2,523,685 160,698 2,684,383
Accumulated Depreciation and Amortization
Balance at beginning of year P1,810,126 P57,120 P1,867,246
Depreciation and amortization 181,656 21,926 203,582
Disposals (100,993 ) 35 (100,958 )
Balance at end of year 1,890,789 79,081 1,969,870
Net Book Value at End of Year P632,896 P81,617 P714,513

Parent Company
2006
Furniture,
Fixtures and Leasehold
Equipment Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P2,893,249 P118,140 P3,011,389
Additions 293,024 22,017 315,041
Disposals (795,268 ) – (795,268)
Balance at end of year 2,391,005 140,157 2,531,162
Accumulated Depreciation and Amortization
Balance at beginning of year 2,272,372 38,672 2,311,044
Depreciation and amortization 156,900 18,448 175,348
Disposals (619,146 ) – (619,146 )
Balance at end of year 1,810,126 57,120 1,867,246
Net Book Value at End of Year P580,879 P83,037 P663,916
 BREAKTHROUGH ON ALL FRONTS 91

The composition of and changes in land and buildings follow:

Consolidated
2007
Land Buildings Total
(In Thousand Pesos)
Appraised Value
Balance at beginning of year P11,242,706 P6,304,011 P17,546,717
Additions – 10,295 10,295
Disposals (928 ) (747 ) (1,675 )
Balance at end of year 11,241,778 6,313,559 17,555,337
Accumulated Depreciation
Balance at beginning of year – 1,392,972 1,392,972
Depreciation – 167,795 167,795
Disposals/others – 5,775 5,775
Balance at end of year – 1,566,542 1,566,542
Allowance for Impairment Losses (Note 16) 264,388 42,538 306,926
Net Book Value at End of Year P10,977,390 P4,704,479 P15,681,869

Consolidated
2006
Land Buildings Total
(In Thousand Pesos)
Appraised Value
Balance at beginning of year P10,404,098 P5,712,302 P16,116,400
Appraisal increase 838,200 577,247 1,415,447
Additions 156,000 25,601 181,601
Disposals (155,592 ) (11,139 ) (166,731 )
Balance at end of year 11,242,706 6,304,011 17,546,717
Accumulated Depreciation
Balance at beginning of year – 1,250,113 1,250,113
Depreciation – 145,353 145,353
Disposals – (2,494 ) (2,494 )
Balance at end of year – 1,392,972 1,392,972
Allowance for Impairment Loss (Note 16) 264,388 42,538 306,926
Net Book Value at End of Year P10,978,318 P4,868,501 P15,846,819

Parent Company
2007
Land Buildings Total
(In Thousand Pesos)
Appraised Value
Balance at beginning of year P11,242,706 P6,304,011 P17,546,717
Additions – 10,295 10,295
Disposals (928 ) (747 ) (1,675 )
Balance at end of year 11,241,778 6,313,559 17,555,337
Accumulated Depreciation
Balance at beginning of year – 1,392,972 1,392,972
Depreciation – 167,795 167,795
Disposals/others – 5,775 5,775
Balance at end of year – 1,566,542 1,566,542
Allowance for Impairment Losses (Note 16) 264,388 42,538 306,926
Net Book Value at End of Year P10,977,390 P4,704,479 P15,681,869
92 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Parent Company
2006
Land Buidings Total
(In Thousand Pesos)
Appraised Value
Balance at beginning of year P10,404,098 P5,705,468 P16,109,566
Appraisal increase 838,200 574,668 1,412,868
Additions 156,000 25,601 181,601
Disposals/others (155,592 ) (1,726 ) (157,318 )
Balance at end of year 11,242,706 6,304,011 17,546,717
Accumulated Depreciation
Balance at beginning of year – 1,247,253 1,247,253
Depreciation – 145,326 145,326
Disposals/others – 393 393
Balance at end of year – 1,392,972 1,392,972
Allowance for Impairment Loss (Note 16) 264,388 42,538 306,926
Net Book Value at End of Year P10,978,318 P4,868,501 P15,846,819

Depreciation on the revaluation increment of the buildings amounted to P77.7 million, P57.3 million and P55.7 million in 2007, 2006 and 2005,
respectively, for the Parent Company.

Depreciation and amortization expense, inclusive of the depreciation on revaluation increment of the buildings, charged against operations of
the Group amounted to P403.3 million, P365.0 million and P550.6 million in 2007, 2006 and 2005, respectively, and P371.4 million in 2007,
P320.7 million in 2006 and P524.6 million in 2005 for the Parent Company. Had the land and buildings been carried at cost, the net book
value of the land and buildings would have been P4.8 billion and P4.9 billion as of December 31, 2007 and 2006, respectively, for the Group
and Parent Company.

13. Investments in Subsidiaries and an Associate

The details of this account follow:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
At equity:
Acquisition cost of:
PNB IIC P– P– P2,028,202 P2,028,202
PNB Europe PLC – – 785,309 785,309
PNB IFL – – 753,061 753,061
PNB Holdings – – 577,876 577,876
PNB Capital – – 350,000 350,000
PNB Forex, Inc. – – 50,000 50,000
PNB Securities, Inc. – – 62,351 62,351
PNB Italy - SpA – – 58,380 58,380
PNB GFRS – – 33,777 33,777
PNB Remittance Center, Ltd. – – 32,042 32,042
Omicron Asset Portfolio (SPV - AMC), Inc. – – 31,250 31,250
Tanzanite Investments (SPV - AMC), Inc. – – 31,250 31,250
Tau Portfolio Investments (SPV - AMC), Inc. – – 31,250 31,250
PNB Corporation - Guam – – 7,672 7,672
PNB Austria – – 6,721 6,721
Japan - PNB Leasing (60% owned) – – 103,176 103,176
PNB Venture Capital Corporation (60% owned) 5,061 5,061 5,061 5,061
Beneficial - PNB Life Insurance Company, Inc. (40% owned) 499,814 499,814 499,814 499,814
504,875 504,875 5,447,192 5,447,192
(Forward)
 BREAKTHROUGH ON ALL FRONTS 93

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Accumulated equity in net earnings:
Balance at beginning of year P207,371 P179,296 P– P–
Equity in net earnings (losses) for the year (79,739 ) 46,299 – –
Dividends/adjustment during the year (3,605 ) (18,224 ) – –
Balance at end of year 124,027 207,371 – –
Share in the equity adjustments of an associate:
Equity in net unrealized gain on AFS investments 10,201 51,840 – –
Equity in revaluation increment 29,278 33,438 – –
Equity in accumulated translation adjustment (3,258 ) 4,314 – –
36,221 89,592 – –
Less allowance for impairment losses (Note 16) – – 66,053 7,672
P665,123 P801,838 P5,381,139 P5,439,520

As discussed in Note 2, the SEC approved on November 7, 2002 the application of the accumulated translation adjustment of P1.6 billion
to eliminate the Parent Company’s remaining deficit of P1.3 billion as of December 31, 2001, after applying the total reduction in par value
amounting to P7.6 billion. The SEC approval is subject to the following conditions: (a) remaining translation adjustment of P310.7 million as
of December 31, 2001 (shown as part of Capital Paid in Excess of Par Value) will not be used to wipe out losses that may be incurred in the
future without prior approval of SEC; and (b) for purposes of dividend declaration, any future surplus account of the Parent Company shall be
restricted to the extent of the deficit wiped out by the translation adjustment.

As of December 31, 2007 and 2006, acquisition cost of the investments in the Parent Company financial statements include the translation
adjustment and accumulated equity in net earnings, net of dividends subsequently received from the quasi-reorganization date, that were
closed to deficit on restructuring date.

The following table illustrates the summarized financial information of the Group’s investment in Beneficial - PNB Life Insurance Company,
Inc.:

2007 2006
(In Thousand Pesos)
Total assets P3,080,005 P3,008,088
Total liabilities 1,429,852 1,115,220
Total revenues 744,938 675,982
Net income (loss) (105,763 ) 115,748

14. Investment Properties

The composition of and changes in this account follow:

Consolidated
2007
Building and
Land Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P22,131,711 P8,396,950 P30,528,661
Additions 3,971,196 576,570 4,547,766
Disposals/others 50,345 (1,251,381 ) (1,201,036 )
Balance at end of year 26,153,252 7,722,139 33,875,391
Accumulated Depreciation and Impairment Losses
Balance at beginning of year 3,852,843 1,793,742 5,646,585
Depreciation – 621,985 621,985
Provision for impairment losses 2,161,353 90,623 2,251,976
Reversals/others (533,228 ) 1,088,471 555,243
Balance at end of year 5,480,968 3,594,821 9,075,789
Net Book Value at End of Year P20,672,284 P4,127,318 P24,799,602
94 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Consolidated
2006
Building and
Land Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P25,027,393 P7,799,810 P32,827,203
Additions 2,281,555 1,901,900 4,183,455
Disposals/others (5,177,237 ) (1,304,760 ) (6,481,997 )
Balance at end of year 22,131,711 8,396,950 30,528,661
Accumulated Depreciation and Impairment Losses
Balance at beginning of year 3,210,227 2,769,209 5,979,436
Depreciation – 746,417 746,417
Provision for impairment losses 642,616 13,030 655,646
Reversals/others – (1,734,914 ) (1,734,914 )
Balance at end of year 3,852,843 1,793,742 5,646,585
Net Book Value at End of Year P18,278,868 P6,603,208 P24,882,076

Parent Company
2007
Building and
Land Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P22,131,135 P8,297,011 P30,428,146
Additions 3,971,196 575,711 4,546,907
Disposals/others 50,921 (1,250,108 ) (1,199,187 )
Balance at end of year 26,153,252 7,622,614 33,775,866
Accumulated Depreciation and Impairment Losses
Balance at beginning of year 3,852,691 1,771,707 5,624,398
Depreciation – 620,004 620,004
Provision for impairment losses 2,161,353 90,623 2,251,976
Reversal/others (533,076 ) 1,088,679 555,603
Balance at end of year 5,480,968 3,571,013 9,051,981
Net Book Value at End of Year P20,672,284 P4,051,601 P24,723,885

Parent Company
2006
Building and
Land Improvements Total
(In Thousand Pesos)
Cost
Balance at beginning of year P25,026,817 P7,698,565 P32,725,382
Additions 2,281,555 1,901,900 4,183,455
Disposals/others (5,177,237 ) (1,303,454 ) (6,480,691 )
Balance at end of year 22,131,135 8,297,011 30,428,146
Accumulated Depreciation and Impairment Losses
Balance at beginning of year 3,210,075 2,750,286 5,960,361
Depreciation – 746,324 746,324
Provision for impairment losses 642,616 13,030 655,646
Reversal/others – (1,737,933 ) (1,737,933 )
Balance at end of year 3,852,691 1,771,707 5,624,398
Net Book Value at End of Year P18,278,444 P6,525,304 P24,803,748
 BREAKTHROUGH ON ALL FRONTS 95

The fair value of the investment properties as of December 31, 2007 and 2006 of the Group amounted to P37.8 billion and P34.4 billion,
respectively, of which P37.6 billion and P34.1 billion, respectively, pertains to the Parent Company as determined by independent and/or
in-house appraisers.

15. Other Assets

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Deferred charges P7,772,368 P6,886,491 P7,769,531 P6,883,295
Software cost 422,545 230,685 417,674 224,065
Prepaid expenses 62,369 229,617 41,786 53,140
Sundry debits 24,324 51,192 24,324 51,192
NPAs to be sold to SPV - net of allowance for credit 
losses of P5.5 billion (Notes 10 and 16) – 2,053,934 – 2,053,934
Miscellaneous 752,315 900,846 621,531 747,867
9,033,921 10,352,765 8,874,846 10,013,493
Less allowance for impairment losses (Note 16) 32,265 515,512 31,999 513,591
P9,001,656 P9,837,253 P8,842,847 P9,499,902

Deferred charges mainly represent the loss on sale to SPVs being amortized over 10 years as allowed by RA No. 9182 (see Notes 9 and 10).

Miscellaneous include exchange trading rights. Under the PSE rules, all exchange trading rights are pledged at its full value to the PSE to secure
the payment of all debts due to other members of the PSE arising out of or in connection with the present or future members’ contracts.

The carrying values of the investment in PSE shares and the exchange trading right in the accounts of PNB Securities were as follows:

2007 2006
(In Thousand Pesos)
AFS investments - 50,000 PSE shares P51,000 P14,000
Exchange trading rights 967 967
P51,967 P14,967

As of December 31, 2007 and 2006, the latest transacted price of the exchange trading right (as provided by the PSE) amounted to P8.0 million
and P5.0 million, respectively. As of December 31, 2007, the market value of the PSE shares based on quoted price is P1,020 per share.

Changes in the software cost are as follows:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Balance at beginning of the year P230,685 P206,940 P224,065 P198,920
Additions 249,146 54,285 249,146 54,285
Amortizations (57,286 ) (30,540 ) (55,537 ) (29,140 )
Balance at end of the year P422,545 P230,685 P417,674 P224,065
96 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

16. Allowance for Impairment and Credit Losses

Changes in the allowance for impairment losses follow:

Consolidated Parent Company
2007 2006 2007 2006
(In Thousand Pesos)
Balance at beginning of year
Property and equipment P306,926 P325,922 P306,926 P325,922
Investment properties 4,134,211 4,036,162 4,134,211 4,036,162
Other assets 515,512 1,008,022 513,591 906,181
Investments in subsidiaries and an associate – – 7,672 –
4,956,649 5,370,106 4,962,400 5,268,265
Provisions during the year 2,452,653 636,650 2,452,653 636,649
Disposals, transfers and others (650,395 ) (1,050,107 ) (590,359 ) (942,514 )
Balance at end of year
Property and equipment (Note 12) 306,926 306,926 306,926 306,926
Investment properties (Note 14) 6,419,716 4,134,211 6,419,716 4,134,211
Other assets (Note 15) 32,265 515,512 31,999 513,591
Investments in subsidiaries and an associate (Note 13) – – 66,053 7,672
P6,758,907 P4,956,649 P6,824,694 P4,962,400

Changes in the allowance for credit losses follow:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Balance at beginning of year:
Loans and receivables P13,497,223 P24,131,080 P13,270,803 P23,936,782
AFS investments 445,428 122,846 445,428 122,846
NPAs to be sold to SPV 5,466,310 – 5,466,310 –
19,408,961 24,253,926 19,182,541 24,059,628
Provisions during the year 828,222 2,165,633 799,034 2,098,087
Accounts charged off, transfers and others (6,968,564 ) (7,010,598 ) (6,996,134 ) (6,975,174 )
Balance at end of year:
Loans and receivables (Note 9) 11,966,288 13,497,223 11,683,110 13,270,803
AFS investments (Note 11) 619,399 445,428 619,399 445,428
Receivable from SPV (Note 10) 682,932 – 682,932 –
NPAs to be sold to SPV (Note 15) – 5,466,310 – 5,466,310
P13,268,619 P19,408,961 P12,985,441 P19,182,541

Below is the breakdown of provision for credit losses by type of loans and receivable for the years ended December 31, 2007 and 2006,
respectively.

Consolidated
2007 2006
Individual Collective Individual Collective
Impairment Impairment Total Impairment Impairment Total
(In Thousand Pesos)
Loans receivables (P201,109 ) P287,444 P86,335 P2,219,175 (P406,519 ) P1,812,656
Unquoted debt instruments – – – (555,662 ) – (555,662 )
Others 362,647 – 362,647 908,639 – 908,639
P161,538 P287,444 P448,982 P2,572,152 (P406,519 ) P2,165,633
 BREAKTHROUGH ON ALL FRONTS 97

Parent Company
2007 2006
Individual Collective Individual Collective
Impairment Impairment Total Impairment Impairment Total
(In Thousand Pesos)
Loans receivables (P229,151 ) P287,444 P58,293 P2,173,994 (P406,519 ) P1,767,475
Unquoted debt instruments – – – (555,662 ) – (555,662 )
Others 361,502 – 361,502 886,274 – 886,274
P132,351 P287,444 P419,795 P2,504,606 (P406,519 ) P2,098,087

A reconciliation of the allowance for impairment losses for loans and receivables by class is as follows:

For the year ended December 31, 2007

Consolidated
Unquoted
Business GOCCs Fringe Debt
loans and NGAs LGUs Consumers Benefits Instruments Others Total
( In Thousand Pesos)
Balance at beginning of year P6,320,199 P16,585 P10,955 P474,492 P35,003 P1,782,069 P4,857,920 P13,497,223
Provisions during the year (13,177 ) 122,458 (807 ) (22,536 ) 397 – 362,647 448,982
Accounts charged off,
transfers and others (280,853 ) – – (3,296 ) 2,242 (201,218 ) (1,060,639 ) (1,543,764 )
Accretion of impaired loans (418,723 ) – – (14,080 ) (2,242 ) – (1,108 ) (436,153 )
Balance at end of year P5,607,446 P139,043 P10,148 P434,580 P35,400 P1,580,851 P4,158,820 P11,966,288

Parent Company
Unquoted
Business GOCCs Fringe Debt
loans and NGAs LGUs Consumers Benefits Instruments Others Total
( In Thousand Pesos)
Balance at beginning of year P6,225,836 P16,585 P10,955 P397,525 P35,003 P1,782,069 P4,802,830 P13,270,803
Provisions during the year (24,007 ) 122,458 (807 ) (39,748 ) 397 – 361,502 419,795
Accounts charged off,
transfers and others (316,040 ) – – 14,080 2,241 (201,217 ) (1,070,399 ) (1,571,335 )
Accretion of impaired loans (418,724 ) – – (14,080 ) (2,241 ) – (1,108 ) (436,153 )
Balance at end of year P5,467,065 P139,043 P10,148 P357,777 P35,400 P1,580,852 P4,092,825 P11,683,110

For the year ended December 31, 2006

Consolidated
Unquoted
Business GOCCs Fringe Debt
loans and NGAs LGUs Consumers Benefits Instruments Others Total
( In Thousand Pesos)
Balance at beginning of year P15,126,938 P188,337 P83,663 P410,873 P22,332 P2,291,555 P6,007,382 P24,131,080
Provisions during the year 1,967,033 (171,752 ) (72,708 ) 77,412 12,671 (555,662 ) 908,639 2,165,633
Accounts charged off,
transfers and others (9,855,663 ) – – (3,525 ) 2,915 46,176 (2,056,857 ) (11,866,954 )
Accretion of impaired loans (918,109 ) – – (10,268 ) (2,915 ) – (1,244 ) (932,536 )
Balance at end of year P6,320,199 P16,585 P10,955 P474,492 P35,003 P1,782,069 P4,857,920 P13,497,223

98 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Parent Company
Unquoted
Business GOCCs Fringe Debt
loans and NGAs LGUs Consumers Benefits Instruments Others Total
( In Thousand Pesos)
Balance at beginning of year P15,034,236 P188,337 P83,663 P342,854 P22,332 P2,291,555 P5,973,805 P23,936,782
Provisions during the year 1,944,593 (171,752 ) (72,708 ) 54,671 12,671 (555,662 ) 886,274 2,098,087
Accounts charged off,
transfers and others (9,834,884 ) – – 10,268 2,915 46,176 (2,056,005 ) (11,831,530 )
Accretion of impaired loans (918,109 ) – – (10,268 ) (2,915 ) – (1,244 ) (932,536 )
Balance at end of year P6,225,836 P16,585 P10,955 P397,525 P35,003 P1,782,069 P4,802,830 P13,270,803

Below is the movement of allowance for credit losses for AFS investments and NPAs to be sold to SPV for the Group and Parent Company:

2007 2006
AFS NPAs to be AFS NPAs to be
investments sold to SPV investments sold to SPV
(In Thousand Pesos)
Balance at beginning of year P445,428 P5,466,310 P122,846 P–
Provisions during the year 146,881 – – –
Disposals, transfers and others 27,090 (5,466,310 ) 322,582 5,466,310
Balance at end of year P619,399 P– P445,428 P5,466,310

17. Deposit Liabilities

Of the total deposit liabilities of the Parent Company, P7.6 billion and P7.4 billion as of December 31, 2007 and 2006, respectively, are
noninterest-bearing. Remaining deposit liabilities generally earned annual fixed interest rates ranging from 0.50% to 5.14% in 2007 and
from 0.50% to 5.13% in 2006 for foreign currency-denominated deposit liabilities, and from 0.50% to 13.94% in 2007 and 2006 for peso-
denominated deposit liabilities.

Under existing BSP regulations, non-FCDU deposit liabilities of the Parent Company are subject to liquidity reserves equivalent to 11.00% and
statutory reserves equivalent to 10.00%. Available reserves follow:

2007 2006
(In Thousand Pesos)
Cash on hand P3,594,104 P4,051,961
Due from BSP 27,961,521 12,566,759
Securities held under agreements to resell 11,200,000 15,700,000
AFS investments 3,733,032 10,383,733
P46,488,657 P42,702,453

As of December 31, 2007 and 2006, the Parent Company was in compliance with such regulations.

Interest expense on deposit liabilities consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Savings P2,984,817 P4,070,575 P3,734,388 P2,984,262 P4,088,182 P3,745,031
Time 793,549 987,658 912,103 790,919 1,071,120 962,556
Demand 108,480 100,243 82,173 108,480 100,243 82,173
P3,886,846 P5,158,476 P4,728,664 P3,883,661 P5,259,545 P4,789,760
 BREAKTHROUGH ON ALL FRONTS 99

18. Bills and Acceptances Payable

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Bills payable to:
BSP and local banks P2,456,145 P2,571,515 P1,748,311 P2,072,515
Foreign banks 1,002,912 1,425,893 768,099 1,140,888
PDIC and others 420,530 6,548,580 538,531 6,738,352
3,879,587 10,545,988 3,054,941 9,951,755
Acceptances outstanding 419,507 409,960 419,507 409,960
P4,299,094 P10,955,948 P3,474,448 P10,361,715

As of December 31, 2007, 10.47% and 13.47% of the bills payable of the Group and the Parent Company, respectively, are subject to periodic
interest repricing. As of December 31, 2006, 70.31% and 70.70% of the bills payable of the Group and the Parent Company, respectively, are
subject to periodic interest repricing. The annual interest rates range from 4.68% to 6.08% for the year ended December 31, 2007 and from
3.70% to 6.19% for the year ended December 31, 2006 for foreign currency-denominated borrowings, and from 2.00% to 12.50% for the
year ended December 31, 2007 and from 3.50% to 12.00% for the year ended December 31, 2006 for peso-denominated borrowings for
the Group and the Parent Company.

The Parent Company’s bills payable to BSP includes the transferred liabilities from Maybank amounting to P1.9 billion as of December 31, 2007
and 2006 (see Note 9).

Under the MOA mentioned in Note 2, notes payable to BSP of P13.9 billion as of October 28, 2001 was assigned to PDIC. Such assignment
increased the Parent Company’s total obligation to PDIC to P23.9 billion. In October 2001, of the total obligation, (a) P10.0 billion was
settled thru “dacion en pago” of the Parent Company’s assets comprising loans to, and debt securities issued by various government entities,
(b) P7.8 billion was converted into convertible preferred shares of the Parent Company, and (c) the balance of P6.1 billion was converted into
a notes payable in ten years with interest of 91-day T-bill rate plus 1.00%.

On October 14, 2006, the Parent Company and PDIC amended the loan and mortgage agreement by way of substitution of collateral at the
request of the Parent Company. PDIC has agreed to release its mortgage lien on the real estate properties and in substitution, the Parent
Company assigned in favor of PDIC certain government securities with a face value of P6.2 billion as of December 31, 2006, (see Note 9). The
bills payable to PDIC was settled on June 19, 2007.

Bills payable - others also includes funding from the Development Bank of the Philippines, Land Bank of the Philippines and the Social Security
System under which the Parent Company acts as a conduit for certain financing programs of these institutions. Lending to such programs is
shown under ‘Loans and receivables’ (see Note 9).

Interest expense on bills payable and other borrowings consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Subordinated debt P953,206 P663,362 P380,803 P965,723 P663,362 P380,803
Bills payable 460,571 636,779 696,920 410,491 589,637 673,172
Others 15,396 254,074 46,643 13,326 252,090 43,473
P1,429,173 P1,554,215 P1,124,366 P1,389,540 P1,505,089 P1,097,448
100 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

19. Accrued Taxes, Interest and Other Expenses

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Interest P2,053,372 P2,575,054 P2,046,474 P2,579,782
Taxes 184,426 114,010 115,932 101,177
Others 2,036,920 2,210,363 2,003,759 2,142,852
P4,274,718 P4,899,427 P4,166,165 P4,823,811

20. Subordinated Debt

On May 26, 2006 and August 3, 2006, the Parent Company’s BOD approved the issuance of unsecured subordinated notes of P5.5 billion that
qualify as Lower Tier 2 capital. The MB, in its Resolution Nos. 979 dated August 3, 2006 and 874 dated July 6, 2006, approved this issuance
subject to the Parent Company’s compliance with certain conditions.

Relative to this, on August 10, 2006, the Parent Company issued P5.5 billion, 10% subordinated notes (the 2006 Notes) due in 2016.

Among the significant terms and conditions of the issuance of such 2006 Notes are:

(a) Issue price at 100.00% of the principal amount;

(b) The 2006 Notes bear interest at the rate of 10.00% per annum from and including August 10, 2006 to but excluding August 10, 2011.
Interest will be payable quarterly in arrears on the 10th of February, May, August and November of each year, commencing on August
10, 2006. Unless the 2006 Notes are previously redeemed, interest from and including August 10, 2011 to but excluding August 10, 2016
will be reset at the equivalent of the five-year Money Market Association of the Philippines 1 Fixed Rate Treasury Notes (MART1 FXTN) as
of reset date multiplied by 80.00%, plus a spread of 4.4935% per annum. The stepped-up interest will be payable quarterly in arrears
on February, May, August and November of each year, commencing on November 10, 2011;

(c) The 2006 Notes constitute direct, unconditional, unsecured and subordinated obligations of the Parent Company and at all times rank
pari passu without preference among themselves and at least equally with all other present and future unsecured and subordinated
obligations of the Parent Company;

(d) The Parent Company may redeem the 2006 Notes in whole but not in part at a redemption price equal to 100.00% of the principal
amount together with accrued and unpaid interest on the day following the last day of the twentieth (20th) interest period from issue
date, subject to the prior consent of the BSP and the compliance by the Bank with the prevailing requirements for the granting by the BSP
of its consent thereof. The 2006 Notes may not be redeemed at the option of the noteholders; and

(e) Each noteholder, by accepting the 2006 Notes, irrevocably agrees and acknowledges that: (i) it may not exercise or claim any right of
set-off in respect of any amount owed by the Parent Company arising under or in connection with the 2006 Notes; and (ii) it shall, to the
fullest extent permitted by applicable law, waive and be deemed to have waived all such rights of set-off.

On December 19, 2003, the Parent Company’s BOD approved the raising of Lower Tier 2 capital through the issuance in the local
capital market of subordinated notes with maximum principal amount of P3.0 billion maturing in 10 years but callable with step-up on
August 16, 2009. The notes bear a coupon rate of 12.50% per annum with step-up after five years.

The issuance of the foregoing subordinated notes under the terms approved by the BOD was approved by the MB, in its Resolution
No. 06/01-23-04 dated January 22, 2004, subject to the Parent Company’s compliance with certain conditions.
 BREAKTHROUGH ON ALL FRONTS 101

Relative to this, on February 16, 2004, the Parent Company issued P3.0 billion, 12.50% Subordinated Notes (the 2004 Notes) due in 2014. As
discussed in Note 30, on March 2, 2004, the Parent Company swapped the proceeds from the 2004 Notes into USD, which are then invested
in USD-denominated interbank placements, Republic of the Philippines (ROP) and US Treasury bonds.

Among the significant terms and conditions of the issuance of such Notes are:

(a) Issue price at 100.00% of the principal amount;

(b) The 2004 Notes bear interest at the rate of 12.50% per annum from and including February 16, 2004 to but excluding February 16, 2009.
Interest will be payable semi-annually in arrears on February 16 and August 16 of each year, commencing on August 16, 2004. Unless the
Notes are previously redeemed, interest from and including February 16, 2009 to but excluding February 16, 2014 will be reset at 11.23%,
the equivalent of the five-year MART1 FXTN as of February 9, 2004, plus a spread of 5.27% per annum. The stepped-up interest will be
payable semi-annually in arrears on February 16 and August 16 of each year, commencing on August 16, 2009;

(c) The 2004 Notes constitute direct, unconditional unsecured and subordinated obligations of the Parent Company and at all times rank
pari passu without preference among themselves and at least equally with all other present and future unsecured and subordinated
obligations of the Parent Company;

(d) The Parent Company may redeem the 2004 Notes in whole but not in part at a redemption price equal to 100.00% of the principal
amount together with accrued and unpaid interest on the day following the last day of the tenth interest period from issue date, subject
to the prior consent of the BSP. The 2004 Notes may not be redeemed at the option of the noteholders; and

(e) Each noteholder, by accepting the 2004 Notes, irrevocably agrees and acknowledges that: (i) it may not exercise or claim any right of
set-off in respect of any amount owed by the Parent Company arising under or in connection with the 2004 Notes; and (ii) it shall to the
fullest extent permitted by applicable law, waive and be deemed to have waived all such rights of set-off.

As of December 31, 2007 and 2006, subordinated debt is net of unamortized transaction cost of P83.6 million and P110.7 million,
respectively.

21. Other Liabilities

This account consists of:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Accounts payable P5,186,627 P3,778,795 P5,093,465 P3,503,276
Bills purchased - contra 4,159,741 2,993,225 4,159,741 2,993,225
Insurance contract liabilities 670,671 637,728 – –
Retirement liability (Note 23) 579,717 336,744 551,234 283,943
Manager’s checks and demand drafts outstanding 450,396 1,987,410 450,396 1,987,410
Due to other banks 368,275 436,387 301,322 413,096
Other dormant credits 340,692 307,266 340,692 307,266
Deposits on lease contracts 223,919 203,621 – –
Deferred credits 223,794 102,810 223,794 102,625
Withholding tax payable 127,866 130,390 123,989 127,844
Due to BSP 122,818 114,312 122,818 114,312
Derivative liability 67,612 6,633 67,612 6,633
Margin deposits and cash letters of credit 35,684 506,282 35,684 506,282
Miscellaneous 1,115,905 1,260,823 489,508 735,925
P13,673,717 P12,802,426 P11,960,255 P11,081,837
102 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

22. Equity

Capital stock as of December 31, 2007 and 2006 consists of (in thousand pesos except for par value and number of shares):

2007 2006 2005

Shares Amount Shares Amount Shares Amount
Preferred - P40 par value
Authorized 195,175,444 195,175,444 195,175,444
Issued and outstanding
Balance at beginning of the year 54,357,751 P2,174,310 54,357,751 P2,174,310 195,175,444 P7,807,018
Conversion to common stock 54,357,751 2,174,310 – – 140,817,693 5,632,708
Balance at end of the year – – 54,357,751 2,174,310 54,357,751 2,174,310
Common - P40 par value
Authorized 1,054,824,557 1,054,824,557 1,054,824,557
Issued and outstanding
Balance at beginning of the year 518,888,165 20,755,527 518,888,165 20,755,527 378,070,472 15,122,819
Conversion from preferred stock 54,357,751 2,174,310 – – 140,817,693 5,632,708
Additional issuance 89,000,000 3,560,000 – – – –
662,245,916 26,489,837 518,888,165 20,755,527 518,888,165 20,755,527
P26,489,837 P22,929,837 P22,929,837

As discussed in Note 1, the Parent Company completed its Tier 1 follow-on equity offering in August 2007 where it raised P5.1 billion, net of
issuance cost of P199.5 million in Tier 1 capital. Together with the sale of 89 million primary shares, 71.8 million secondary shares owned by
the NG thru PDIC and DOF were sold to the public thus paving for a complete exit of the NG from the Parent Company.

The Parent Company shares are listed in the PSE.

The preferred shares have the following features:

(a) Non-voting, non-cumulative, fully participating in dividends with the common shares;

(b) Convertible, at any time at the option of the holder who is qualified to own and hold common shares;

(c) With mandatory and automatic conversion into common shares upon the sale of such preferred shares to any person other than the NG
or any GOCC’s; and

(d) With rights to subscribe to additional new preferred shares with all of the features described above.

The additional issuance of 89.0 million common shares was approved by the BOD on March 23, 2007.

Capital Management
The primary objectives of the Parent Company’s capital management are to ensure that it complies with externally imposed capital requirements
and it maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholders’ value.

The Parent Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of its activities. In order to maintain or adjust the capital structure, the Parent Company may adjust the amount of dividend
payment to shareholders, return capital structure, or issue capital securities. No changes were made in the objectives, policies and processes
from the previous years.

Regulatory Qualifying Capital

Under existing BSP regulations, the determination of the Parent Company’s compliance with regulatory requirements and ratios is based on
the amount of the Parent Company’s “unimpaired capital” (regulatory net worth) reported to the BSP, which is determined on the basis of
regulatory policies, which differ from PFRS in some respects. In addition, the risk-based capital ratio of a bank, expressed as a percentage of
qualifying capital to risk-weighted assets, should not be less than 10.00% for both solo basis (head office and branches) and consolidated
basis (parent bank and subsidiaries engaged in financial allied undertakings but excluding insurance companies). Qualifying capital and risk-
weighted assets are computed based on BSP regulations.
 BREAKTHROUGH ON ALL FRONTS 103

The regulatory Gross Qualifying Capital of the Parent Company consists of Tier 1 (core) and Tier 2 (supplementary) capital. Tier 1 capital
comprises share capital, retained earnings (including current year profit) and minority interest less required deductions such as deferred income
tax and unsecured credit accommodations to directors, officers, stockholders and related interests (DOSRI). Tier 2 capital includes unsecured
subordinated debts, revaluation reserves and general loan loss provision. Certain items are deducted from the regulatory Gross Qualifying
Capital, such as but not limited to equity investments in unconsolidated subsidiary banks and other financial allied undertakings, but excluding
insurance companies (for solo basis); investments in debt capital instruments of unconsolidated subsidiary banks (for solo basis); and equity
investments in subsidiary insurance companies and subsidiary non-financial allied undertakings; and reciprocal investments in equity of other
banks/enterprises.

Risk-weighted assets are determined by assigning defined risk weights to amounts of on-balance sheet exposures and to the credit equivalent
amounts of off-balance sheet exposures. Certain items are deducted from risk-weighted assets, such as the excess of general loan loss
provision over the amount permitted to be included in Tier 2 capital. The risk weights vary from 0% to 150% depending on the type of
exposure, with the risk weights of off-balance sheet exposures being subjected further to credit conversion factors. Below is a summary of
exposure types and their corresponding risk weights:

Risk weight Exposure/Asset type*

Cash on hand; all peso denominated exposures to the PNG and BSP, exposures to Multilateral Development
Banks (MDB), Bank for International Settlements (BIS), International Monetary Fund (IMF), European Central Bank
0% (ECB) and the European Community (EC)
20% COCI, claims guaranteed by Philippine/foreign incorporated banks/quasi-banks with the highest credit quality;
and exposures as enumerated in standardized credit risk weight below
50% Housing loans fully secured by first mortgage on residential property; and exposures as enumerated in standardized
credit risk weight below
75% MSME qualified portfolio
All other assets excluding those deducted from capital (e.g., deferred income tax and equity investments), financial
assets held for trading, securitization exposures, unsecured DOSRI and accumulated market gains/(losses) on
100% available for sale debt securities; defaulted housing loans exposures
All defaulted exposures (except defaulted housing loan exposures and below B- rating exposures in standardized
150% credit risk weight enumerated below
* Not all inclusive

STANDARDIZED CREDIT RISK WEIGHTS

Credit Assessment AAA AA+ to AA A+ to A- BBB+ to BBB- BB+ to BB B+ to B- Below B- Unrated
Sovereigns 0% 0% 20% 50% 100% 100% 150% 100%
MDBs 0% 20% 50% 50% 100% 100% 150% 100%
Banks 20% 20% 50% 50% 100% 100% 150% 100%
Interbank call loans 20%
Local government units 20% 20% 50% 50% 100% 100% 150% 100%
Government Corporations 20% 20% 50% 100% 100% 150% 150% 100%
Corporates 20% 20% 50% 100% 100% 150% 150% 100%
Housing loans 50%
MSME qualified portfolio 75%
Defaulted exposures
Housing loans 100%
Others 150%
ROPA 150%
All other assets 100%
104 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

With respect to off-balance sheet exposures, the exposure amount is multiplied by a credit conversion factor (CCF), ranging from 0% to 100%,
to arrive at the credit equivalent amount, before the risk weight factor is multiplied to arrive at the risk-weighted exposure. Direct credit
substitutes (e.g., guarantees) have a CCF of 100%, while items not involving credit risk has a CCF of 0%.

In the case of derivatives, the credit equivalent amount (against which the risk weight factor is multiplied to arrive at the risk-weighted
exposure) is generally the sum of the current credit exposure or replacement cost (the positive fair value or zero if the fair value is negative
or zero) and an estimate of the potential future credit exposure or add-on. The add-on ranges from 0% - 1.5% for interest rate-related, 1%
- 7.5% for exchange rate-related, and 6.0% to 10.0% for equity contract depending on the residual maturity of the contract. The credit
equivalent amount shall be treated like any on-balance sheet asset, and shall be assigned the appropriate risk weight, i.e. according to the third
part credit assessment of the counterpart exposure.

As discussed in Note 2, the BSP approved the booking of additional appraisal increment of P431.8 million in 2001 on properties and recognition
of the same in determining the capital adequacy ratio, and booking of translation adjustment of P1.6 billion in 2001 representing the increase
in peso value of the investment in foreign subsidiaries for purposes of the quasi-reorganization and rehabilitation of the Parent Company
provided that the same shall be excluded for dividend purposes. As of December 31, 2007 and 2006, the Group was in compliance with the
CAR.

The CAR of the Group as reported to the BSP as of December 31, 2007 and 2006 are shown in the table below.

2007 2006
Actual 1/ Required Actual 2/ Required
(Amounts in Million Pesos)
Tier 1 capital P22,706.8 P16,644.0
Tier 2 capital 10,345.0 9,317.7
Gross qualifying capital 33,051.8 25,961.7
Less required deductions 0.4 0.5
Total qualifying capital P33,051.4 P17,365.50 P25,961.2 P13,263.4
Risk weighted assets P173,655.2 P132,633.8
Tier 1 capital ratio 13.08% 12.55%
Total capital ratio 19.03% 19.57%
1/ Data are based on consolidated CAR combined credit, market and operational risks (BSP Cir. No. 538).
2/ Data are based on consolidated CAR for credit risks (BSP Cir. No. 280).

The BSP, under BSP Circular 538 dated August 4, 2006, has issued the prescribed guidelines implementing the revised risk-based
capital adequacy framework for the Philippine banking system to conform to Basel II recommendations. The new BSP guidelines took effect on
July 1, 2007.

The increase in the regulatory qualifying capital in 2007 is mainly due to the additional issuance of Tier 1 follow-on equity offering in
August 2007.

Financial Performance
The following basic ratios measure the financial performance for the years ended December 31, 2007 and 2006 of the Group and the Parent
Company:

Consolidated Parent Company

2007 2006 2007 2006
(Amounts in Million Pesos)
Return on average equity (a/b) 5.45 % 3.44 % 5.09 % 3.17 %
a.) Net income P1,498 P820 P1,335 P706
b.) Average total equity 27,493 23,833 26,242 22,280
Return on average assets (c/d) 0.62 % 0.35 % 0.56 % 0.30 %
c.) Net income P1,498 P820 P1,335 P706
d.) Average total assets 241,588 233,065 239,890 231,550
Net interest margin on average earning assets (e/f) 3.75 % 3.77 % 3.59 % 3.59 %
e.) Net interest income P5,878 P5,345 P5,441 P4,891
f.) Average interest earning assets 156,567 141,691 151,744 136,406

Note: Average balances were determined as the sum of beginning and ending balances of the respective balance sheet accounts as of the end of the year divided by two (2).
 BREAKTHROUGH ON ALL FRONTS 105

23. Retirement Plan

The Parent Company has separate funded noncontributory defined benefit retirement plans covering substantially all its officers and regular
employees. Under these retirement plans, all covered officers and employees are entitled to cash benefits after satisfying certain age and
service requirements.

The Parent Company’s annual contribution to the retirement plan consists of a payment covering the current service cost, amortization of the
unfunded actuarial accrued liability and interest on such unfunded actuarial liability. The retirement plan provides a retirement benefit equal
to one hundred and twelve percent (112.00%) of plan salary per month for every year of credit service.

The following table shows the actuarial assumptions as of January 1, 2007 and 2006 used in determining the retirement benefit obligation of
the Parent Company:

2007 2006
Expected rate of return on plan assets 7% 10%
Discount rate 7% 14%
Salary rate increase 8% 8%

As of December 31, 2007, the discount rate used in determining the retirement obligation is 10%.

The overall expected rate of return on plan assets is determined based on the market prices prevailing on that date applicable to the period
over which the obligation is to be settled.

An actuarial valuation was made on December 31, 2007.

The amount of liability recognized in the Parent Company balance sheets (included under Other liabilities) is as follows (in thousand pesos):

2007 2006
Present value of defined benefit obligation P1,648,256 P1,986,807
Fair value of plan assets 958,856 945,053
689,400 1,041,754
Unrecognized actuarial gains (138,166 ) (757,811 )
Retirement liability P551,234 P283,943

The amounts included in Compensation and fringe benefits in the Parent Company statement of income are as follows (in thousand pesos):

2007 2006 2005

Current service cost P157,093 P68,859 P60,403
Interest cost 139,077 108,597 93,425
Expected return on plan assets (66,154 ) (71,032 ) (67,733 )
Net actuarial gains recognized during the year 37,275 (2,305 ) (2,399 )
P267,291 P104,119 P83,696

The actual return on plan assets amounted to P98.4 million, P289.9 million and P78.5 million in 2007, 2006 and 2005, respectively.

The movements in the retirement liability recognized in the Parent Company balance sheet follow (in thousand pesos):

2007 2006
Balance at beginning of year P283,943 P179,824
Retirement expense 267,291 104,119
Balance at end of year P551,234 P283,943
106 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Changes in the present value of the defined benefit obligation are as follows (in thousand pesos):

2007 2006
Defined benefit obligation at beginning of year P1,986,807 P775,689
Interest cost 139,077 108,597
Current service cost 157,093 68,859
Benefits paid (84,555 ) (55,168 )
Actuarial loss (gain) (550,166 ) 1,088,830
Defined benefit obligation at end of year P1,648,256 P1,986,807

Changes in the fair value of the plan assets are as follows (in thousand pesos):

2007 2006
Fair value of plan assets at beginning of year P945,053 P710,317
Expected return 66,154 71,032
Benefits paid (84,555 ) (55,168)
Actuarial gain 32,204 218,872
Fair value of plan assets at end of year P958,856 P945,053

The fair value of the plan assets as of December 31, 2007 and 2006 includes the fair value of the investments in the Parent Company shares
of stocks amounting to P391.7 million and P344.7 million, respectively.

The Parent Company believes that the plan has enough funds to pay any retiring employee. Accordingly, it does not expect to contribute to
the plan in 2008.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

2007 2006
Parent Company’s own common shares 41 % 37 %
Government securities 23 53
Receivables from related parties 12 10
Equity securities and others 24 –
100 % 100 %

Information on the Parent Company’s pension plan (in thousand pesos) are as follows:

2007 2006
Present value of the defined benefit obligation P1,648,256 P1,986,807
Fair value of plan assets 958,856 945,053
Deficit in plan assets 689,400 1,041,754
Experience adjustments arising on plan liabilities 86,992 52,968
Experience adjustments arising on plan assets 32,204 218,872

As of December 31, 2007 and 2006, the net retirement liability (asset) included in Miscellaneous liabilities and assets, respectively, of certain
subsidiaries of the Group follows (in thousand pesos):

PNB Europe PNB Capital PNB Securities Japan-PNB PNB Gen

December 31, 2006 50,893 (1,597) 95 1,813 (7,836)
December 31, 2007 25,784 (1,597) 196 2,504 (6,628)

Retirement expense of the Group charged to operations, included in Compensation and fringe benefits in the statements of income amounted
to P273.7 million, P107.9 million and P92.4 million in 2007, 2006 and 2005, respectively.
 BREAKTHROUGH ON ALL FRONTS 107

24. Leases

The Parent Company leases the premises occupied by majority of its branches (about 41.59% of the branch sites are Parent Company-owned).
Some of its subsidiaries also lease the premises occupied by their Head Offices and most of their branches. The lease contracts are for periods
ranging from 1 to 25 years and are renewable at the Group’s option under certain terms and conditions. Various lease contracts include
escalation clauses, most of which bear an annual rent increase of 10%.

Rent expense charged against current operations (included in ‘Occupancy and equipment-related costs’ in the statements of income) amounted
to P393.0 million in 2007, P346.3 million in 2006 and P383.2 million in 2005 for the Group, of which P247.3 million in 2007, P247.6 million
in 2006 and P274.7 million in 2005 pertain to the Parent Company.

Future minimum rentals payable under non-cancelable operating leases follow:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Within one year P157,777 P246,298 P121,020 P150,358
Beyond one year but not more than five years 288,145 498,531 261,452 348,704
Beyond more than five years 31,302 90,483 31,302 51,689
P477,224 P835,312 P413,774 P550,751

The Parent Company has entered into commercial property leases on its investment property. These non-cancelable leases have remaining
lease terms of between two and five years. Some leases include escalation clauses (such as 5% per year). In 2007, 2006 and 2005, total rent
income (included under ‘Miscellaneous income’) amounted to P196.3 million, P209.9 million and P172.2 million, respectively, for the Group
and P192.1 million, P207.5 million and P171.04 million, respectively, for the Parent Company.

Future minimum rentals receivable under non-cancelable operating leases follow:

2007 2006
(In Thousand Pesos)
Within one year P9,882 P30,587
Beyond one year but not more than five years 27,715 6,290
P37,597 P36,877

25. Income and Other Taxes

Under Philippine tax laws, the Parent Company and certain subsidiaries are subject to percentage and other taxes (presented as Taxes and
Licenses in the statements of income) as well as income taxes. Percentage and other taxes paid consist principally of gross receipts tax and
documentary stamp tax.

Income taxes include the corporate income tax, discussed below, and final taxes paid which represents final withholding tax on gross interest
income from government securities and other deposit substitutes and income from the FCDU transactions. These income taxes, as well as the
deferred tax benefits and provisions, are presented as ‘Provision for income tax’ in the statements of income.

RA No. 9337, An Act Amending National Internal Revenue Code, provides that the RCIT rate shall be 35.00% until December 31, 2008. Starting
January 1, 2009, the RCIT rate shall be 30.00%. Interest expense allowed as a deductible expense is reduced by 42.00% starting November
1, 2005 until December 31, 2008. Starting January 1, 2009, interest expense allowed as a deductible expense shall be reduced by 33.00% of
interest income subjected to final tax.

An MCIT of 2% on modified gross income is computed and compared with the RCIT. Any excess of MCIT over the RCIT is deferred and can
be used as a tax credit against future income tax liability for the next three years. In addition, NOLCO is allowed as a deduction from taxable
income in the next three years from the period of incurrence for the Parent Company and certain subsidiaries.
108 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

FCDU offshore income (income from non-residents) is tax-exempt while gross onshore income (income from residents) is generally subject to
10% income tax. In addition, interest income on deposit placement with other FCDUs and offshore banking units (OBUs) is taxed at 7.50%.
RA No. 9294, which became effective in May 2004, provides that the income derived by the FCDU from foreign currency transactions with
non-residents, OBUs, local commercial banks including branches of foreign banks is tax-exempt while interest income on foreign currency loans
from residents other than OBUs or other depository banks under the expanded system is subject to 10.00% income tax.

Provision for income tax consists of:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Current P617,873 P728,113 P712,602 P479,865 P538,852 P552,654
Deferred (8,361 ) 204,566 1,179,124 (12,684 ) 220,022 1,179,124
P609,512 P932,679 P1,891,726 P467,181 P758,874 P1,731,778

Net deferred tax assets of the Group are included in the following accounts in the balance sheet:

2007 2006
(In Thousand Pesos)
Deferred tax asset P1,857,109 P1,847,258
Other liabilities 29,121 10,439
P1,827,988 P1,836,819

The components of net deferred tax assets are as follows:

Consolidated Parent Company

2007 2006 2007 2006
( In Thousand Pesos)
Deferred tax asset on:
Allowance for impairment losses P3,261,154 P3,291,831 P3,253,106 P3,254,691
NOLCO and others 124,044 105,012 – –
3,385,198 3,396,843 3,253,106 3,254,691
Deferred tax liability on:
Revaluation increment on land and buildings 859,117 882,352 859,117 882,352
Unrealized trading gains on derivatives 352,743 325,744 352,743 325,744
Unrealized gain on AFS investments 60,442 43,250 41,417 33,104
Others 284,908 308,678 201,167 219,200
1,557,210 1,560,024 1,454,444 1,460,400
P1,827,988 P1,836,819 P1,798,662 P1,794,291

Deferred tax charged (credited) directly to equity during the year is as follows:

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Unrealized gain on AFS investments P17,192 (P63,551 ) P8,313 (P65,008 )
Revaluation increment on land and buildings – 424,634 – 424,634
Others – 224,995 – 224,995
P17,192 P586,078 P8,313 P584,621

Based on the five-year financial forecast prepared by management and duly approved by the Executive Committee of the BOD, the Parent
Company’s deferred tax assets of P1.8 billion and P2.6 billion as of December 31, 2007 and 2006, respectively, is expected to be realized from
its taxable profits within the next three to five years. The Parent Company and certain subsidiaries did not recognize deferred tax assets on
the following temporary differences:
 BREAKTHROUGH ON ALL FRONTS 109

Consolidated Parent Company

2007 2006 2007 2006
(In Thousand Pesos)
Investment properties:
Allowance for impairment losses P6,419,716 P4,134,211 P6,419,716 P4,134,211
Accumulated depreciation 2,632,265 2,268,266 2,632,265 2,268,266
Fair value adjustment (8,985,005 ) (6,063,609 ) (8,985,005 ) (6,063,609 )
66,976 338,868 66,976 338,868
Allowance for impairment losses on loans and receivables 479,819 8,251,435 429,248 8,165,093
NOLCO 27,097,239 20,874,427 27,080,071 20,851,059
MCIT 76,178 55,983 75,761 54,911
Others 1,888,586 1,468,379 1,887,711 1,396,488
P29,608,798 P30,989,092 P29,539,767 P30,806,419

Details of the Group’s NOLCO follow:

Year Incurred Amount Used/Expired Balance Expiry Year

(In Thousand Pesos)
1992 to 1999 P12,121 P6,324 P5,797 2002 to 2009
2004 1,700,948 1,700,948 – 2007
2005 7,029,130 – 7,029,130 2008 to 2010
2006 11,473,748 – 11,473,748 2009 to 2011
2007 8,618,816 – 8,618,816 2010 to 2012
P28,834,763 P1,707,272 P27,127,491

The Group’s NOLCO of P11.5 billion in 2006 and P7.0 billion in 2005 includes the Parent Company’s loss on sale of NPAs to SPV companies
amounting to P9.6 billion in 2006 and P5.4 billion in 2005 which can be claimed as deductions from taxable income for a period of five
consecutive taxable years immediately following the year of sale.

The Group’s NOLCO includes net operating losses of PNB Corporation - Guam from 1992 to 1999 amounting to P12.1 million recognized
based on applicable tax laws similar to those of USA. Guam’s NOLCO matures 10 years from the date such NOLCO was incurred.

Details of the Group’s MCIT follow:

Year Incurred Amount Used/Expired Balance Expiry Year

(In Thousand Pesos)
2004 P16,428 P16,428 P– 2007
2005 25,510 – 25,510 2008
2006 14,045 – 14,045 2009
2007 36,623 – 36,623 2010
P92,606 P16,428 P76,178

Details of the Parent Company’s NOLCO follow:

Year Incurred Amount Used/Expired Balance Expiry Year

(In Thousand Pesos)
2004 P1,689,030 P1,689,030 P– 2007
2005 7,029,130 – 7,029,130 2008 to 2010
2006 11,432,125 – 11,432,125 2009 to 2011
2007 8,618,816 – 8,618,816 2010 to 2012
P28,769,101 P1,689,030 P27,080,071
110 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Details of the Parent Company’s MCIT follow:

Year Incurred Amount Used/Expired Balance Expiry Year

(In Thousand Pesos)
2004 P15,773 P15,773 P– 2007
2005 25,510 – 25,510 2008
2006 13,628 – 13,628 2009
2007 36,623 – 36,623 2010
P91,534 P15,773 P75,761

The reconciliation between the statutory income tax rate to effective income tax rate follows:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
Statutory income tax rate 35.00 % 35.00 % 32.50 % 35.00 % 35.00 % 32.50 %
Tax effects of:
Net unrecognized deferred tax assets 33.04 39.52 76.27 38.57 41.13 96.82
Non-deductible expenses 11.14 10.76 10.38 10.63 12.74 13.19
FCDU income before tax (15.18 ) (16.12 ) (25.35 ) (17.75 ) (19.28 ) (32.21 )
Tax-exempt income (8.55 ) (12.01 ) (12.38 ) (8.39 ) (14.37 ) (15.73 )
Tax-paid income (24.88 ) (3.94 ) (6.96 ) (32.14 ) (3.41 ) (7.23 )
Others - net (1.66 ) – 0.63 – – –
Effective income tax rate 28.91 % 53.21 % 75.09 % 25.92 % 51.81 % 87.34 %

Revenue Regulations (RR) No. 10-2002 defines expenses to be classified as entertainment, amusement and recreation expenses (EARE)
and set a limit for the amount that is deductible for tax purposes. EARE are limited to 1.00% of net revenues for sellers of services. EARE
charged against current operations (included in ‘Miscellaneous expense’) amounted to P130.8 million in 2007, P117.0 million in 2006 and
P116.1 million in 2005 for the Group and P126.3 million in 2007, P111.7 million in 2006 and P110.1 million in 2005 (see Note 26).

26. Income and Expenses

Service fees and commission income consists of:

Consolidated Parent Company
2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Remittance P1,021,760 P1,142,124 P1,199,920 P355,984 P366,878 P345,135
Deposit-related 891,322 928,936 1,099,468 891,322 928,936 1,099,468
Credit-related 196,775 250,339 354,418 188,675 241,646 345,629
Trust fees 106,685 238,828 202,160 106,685 238,828 202,160
Miscellaneous 264,695 207,235 58,465 15,957 19,915 15,790
P2,481,237 P2,767,462 P2,914,431 P1,558,623 P1,796,203 P2,008,182

Miscellaneous income consists of:

Consolidated Parent Company
2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Net gain on sale or exchange of assets P3,410,352 P1,317,083 P372,542 P3,409,364 P1,317,083 P372,542
Rental (Notes 28) 196,295 209,918 172,200 192,129 207,535 171,038
Others 701,374 626,785 783,579 693,029 726,032 604,951
P4,308,021 P2,153,786 P1,328,321 P4,294,522 P2,250,650 P1,148,531
 BREAKTHROUGH ON ALL FRONTS 111

Miscellaneous expenses consist of:

Consolidated Parent Company
2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Insurance P410,623 P383,333 P424,245 P408,685 P379,922 P422,380
Security, clerical, messengerial 279,418 316,232 – 276,986 310,232 –
Foreclosure 219,777 187,135 247,888 219,777 187,135 247,888
Transportation and travel 138,944 133,742 123,917 127,783 127,498 118,064
Representation and entertainment 130,754 117,710 116,099 126,312 111,655 110,100
Stationery and supplies used 124,441 132,958 120,076 121,178 126,179 119,632
Management and professional fees 122,935 152,895 358,683 80,647 110,229 243,251
Promotional 121,481 156,325 153,910 121,475 146,331 152,192
Others 948,861 953,907 1,097,713 486,523 505,188 601,528
P2,497,234 P2,534,237 P2,642,531 P1,969,366 P2,004,369 P2,015,035

Miscellaneous - others include information technology-related expenses, postage, telephone and telegraph, repairs and maintenances, EARE
and litigation expenses.

27. Trust Operations

Securities and other properties held by the Parent Company in fiduciary or agency capacities for its customers are not included in
the accompanying balance sheet since these are not assets of the Parent Company. Such assets held in trust were carried at a value of
P22.4 billion and P14.1 billion as of December 31, 2007 and 2006, respectively (see Note 29). In connection with the trust functions of
the Parent Company, government securities amounting to P232.4 million and P157.9 million (included under ‘AFS investments’ and ‘HTM
investments’) as of December 31, 2007 and 2006, respectively, are deposited with the BSP in compliance with trust regulations.

In compliance with existing banking regulations, the Parent Company transferred from deficit to surplus reserves of P19.9 million in 2007,
P17.1 million in 2006 and P13.4 million in 2005, corresponding to the 10.00% of the net income realized from its trust, investment management
and other fiduciary business until such related surplus reserve constitutes 20.00% of its regulatory capital.

28. Related Party Transactions

In the ordinary course of business, the Parent Company has loans and other transactions with its subsidiaries and affiliates, and with certain
DOSRI. Under the Parent Company’s policy, these loans and other transactions are made substantially on the same terms as with other
individuals and businesses of comparable risks. The amount of direct credit accommodations to each of the Parent Company’s DOSRI, 70.00%
of which must be secured, should not exceed the amount of their respective deposits and book value of their respective investments in the
Parent Company. In the aggregate, DOSRI loans generally should not exceed the Parent Company’s equity or 15% of the Parent Company’s
total loan portfolio, whichever is lower. As of December 31, 2007 and 2006, the Parent Company was in compliance with such regulations.

The information relating to the DOSRI loans of the Group follows (amounts in thousand pesos):

2007 2006
Total outstanding DOSRI loans
Inclusive of loans extended to NG and GOCCs P2,410,629 P12,574,264
Exclusive of loans extended to NG and GOCCs 2,410,629 2,473,406
Percent of DOSRI loans to total loans
Inclusive of loans extended to NG and GOCCs 3.71% 20.85%
Exclusive of loans extended to NG and GOCCs 3.71% 4.10%
Percent of unsecured DOSRI loans to total DOSRI loans
Inclusive of loans extended to NG and GOCCs 3.32% 0.75%
Exclusive of loans extended to NG and GOCCs 3.32% 3.82%
Percent of past due DOSRI loans to total DOSRI loans 1.21% 1.23%
Percent of nonperforming DOSRI loans to total DOSRI loans – –

As discussed in Note 2, in August 2007, the Parent Company completed its Tier 1 follow-on equity offering where it raised about P5.0 billion
in Tier 1 capital. Together with the sale of 89 million primary shares, 71.8 million secondary shares owned by the NG thru PDIC and DOF were
sold to the public thus paving for a complete exit of the government from the Parent Company. Accordingly, DOSRI as of December 31, 2007
no longer includes loans to NG and GOCCs as they are no longer considered related parties.
112 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

In accordance with existing BSP regulations, the reported DOSRI performing loans exclude loans extended to certain borrowers before these
borrowers became DOSRI.

As of December 31, 2006, the information relating to Parent Company’s receivables and other accommodations to government units follows
(in thousand pesos):

NG/GOCCs with NG guaranty P7,628,955

GOCCs 2,471,903
P10,100,858

In the computation of the allowed DOSRI loans (the lower of the Parent Company’s equity or 15% of the Parent Company’s total portfolio),
the receivables from NG and GOCCs with NG guaranty are not included.

The Parent Company has lease agreements with some of its subsidiaries. In 2005, the lease agreement was amended to indicate the share
of the subsidiaries in the maintenance of the building in lieu of rental payments. The income related to these agreements amounting to
P4.8 million in 2007 and 2006 and P4.7 million in 2005 is included in ‘Miscellaneous income’ in the statement of income.

On January 31, 2007, BSP Circular No. 560 was issued providing the rules and regulations that govern loans, other credit accommodations
and guarantees granted to subsidiaries and affiliates of banks and quasi-banks. Under the said Circular, total outstanding exposures to each
of the bank’s subsidiaries and affiliates shall not exceed 10% of bank’s net worth, the unsecured portion of which shall not exceed 5% of such
networth. Further, the total outstanding exposures to subsidiaries and affiliates shall not exceed 20% of the networth of the lending bank.
BSP Circular No. 560 is effective on February 15, 2007.

The significant account balances with respect to related parties included in the financial statements (after appropriate eliminations have been
made) follow:

2007 2006
Loans Interest Loans Interest
Related Party Receivable Income Receivable Income
(In Thousand Pesos)
Fortune Tobacco Corporation (FTC) P1,500,000 P100,132 P1,500,000 P125,962
Asia Brewery Inc. (ABI) 500,000 33,425 500,000 43,667
Asian Institute of Management (AIM) 134,782 14,277 144,854 15,313
Philippine Airlines (PAL) – – 6,497 –
Others 275,847 60,120 322,055 12,072
P2,410,629 P207,954 P2,473,406 P197,014

FTC, ABI and PAL are also owned by LTG. The Parent Company and AIM have common directors which the BSP considered as related parties.

Other related party transactions represent real estate and other loans granted to the officers of the Group.

The compensation of the key management personnel follows:

Consolidated Parent Company

2007 2006 2005 2007 2006 2005
(In Thousand Pesos)
Short term employee benefits P144,732 P109,213 P101,522 P49,036 P48,296 P46,059
Post-employment benefits 8,937 4,843 6,002 6,486 2,527 3,781
P153,669 P114,056 P107,524 P55,522 P50,823 P49,840

29. Commitments and Contingent Liabilities

In the normal course of business, the Group makes various commitments and incurs certain contingent liabilities that are not presented in the
financial statements including several suits and claims remain unsettled. No specific disclosures on such unsettled assets and claims are made
because any such specific disclosures would prejudice the Group’s position with the other parties with whom it is in dispute. Such exemption
from disclosures is allowed under PAS 37, Provisions, Contingent Liabilities and Contingent Assets. The Group and its legal counsel believe that
any losses arising from these contingencies which are not specifically provided for will not have a material adverse effect on the financial
statements.
 BREAKTHROUGH ON ALL FRONTS 113

In November 1994, the BSP, Maybank and the Parent Company executed a Memorandum of Agreement (MA) providing for the settlement
of Maybank’s P3.0 billion liabilities to the BSP. Under this MA, the Parent Company is jointly and severally liable with Maybank for the full
compliance and satisfaction of the terms and conditions therein. The MA provides for the creation of an escrow fund to be administered by
the BSP where all collections from conveyed assets and certain annual guaranteed payments required under the MA are to be deposited.

Relative to the sale of the Parent Company’s 60% interest in Maybank, the Parent Company has requested the BSP to consider the revision of
the terms of the MA to, among others, (a) delete the provision on the annual guaranteed payments in consideration of an immediate payment
by the Parent Company of an agreed amount, and (b) exclude Maybank as a party to the MA. On May 7, 1997, the BSP approved the Parent
Company’s request to amend the terms of the MA, subject to the following conditions among others:

a) The Parent Company shall remit P150.0 million to the escrow account out of the proceeds from sale;

b) The Parent Company shall remit to the escrow account an amount equivalent to 50% of any profit that may be realized by the Parent
Company on account of the sale; and

c) If the amount in the escrow account has not reached the total of P3.0 billion by June 30, 2013, the difference shall be paid by the Parent
Company by way of a debit to its regular account with the BSP.

On November 28, 1997, the Parent Company remitted P150.0 million in compliance with item (a). The Parent Company anticipates that the
payment of P150.0 million to the BSP together with the existing balance of the funds in escrow as of that date will allow the escrow account
to reach the required P3.0 billion earlier than programmed. This has effectively released the Parent Company from any further payments under
the MA.

The Parent Company’s remaining investment in Maybank was sold on June 29, 2000. The sale was approved by the BSP on August 16, 2000.

On August 17, 2007, the Parent Company and the BSP amended certain provisions of the MA as follows:

1. The Parent Company will no longer act as the collecting agent for the BSP on the conveyed assets (Asset Pool 1);
2. The Parent Company will no longer remit the amount collected from the Asset Pool 1 to the escrow account;
3. BSP will revert to the Parent Company all the Asset Pool 1 accounts categorized as sugar and sugar-related accounts; and
4. The Parent Company will submit to BSP acceptable collaterals with an appraised value of at least P300.0 million as substitute for the
sugar-related loans under Asset Pool 1.

On the same date, the Parent Company executed a real estate mortgage for various real estate properties with an aggregate fair value of
P300.0 million in favor of the BSP.

As of December 31, 2007 and 2006, the total trust assets of the escrow account maintained with the BSP amounted to P2.2 billion and
P2.0 billion, respectively. Average yield during the year ranged from 7.19% to 14.17%. Management expects that the value of the escrow
account and the collection from the asset Pool 1 by 2013 will be more than adequate to cover the P3.0 billion liability due the BSP.

BSP Reporting
The following is a summary of various commitments, contingent assets and contingent liabilities at their equivalent peso contractual
amounts:
Consolidated Parent Company
2007 2006 2007 2006
(In Thousand Pesos)
Trust department accounts P22,435,217 P14,130,582 P22,435,217 P14,130,582
Deficiency claims receivable 7,667,406 12,772,446 7,667,406 12,763,100
Unused commercial letters of credit 4,986,755 6,962,819 4,986,755 6,962,819
Confirmed export letters of credit 2,750,714 2,733,999 2,750,714 2,733,999
Inward bills for collection 1,576,187 6,533,310 1,576,187 6,533,310
Outstanding guarantees issued 582,795 351,967 304,794 101,967
Outward bills for collection 164,860 152,738 164,770 152,738
Other contingent accounts 123,874 55,608 117,819 52,561
Items held as collateral 597 3,779 597 3,779
114 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

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NOTES TO FINANCIAL STATEMENTS

30. Derivative Financial Instruments

The table below shows the fair values of derivative financial instruments entered into by the Parent Company, recorded as derivative assets
or derivative liabilities, together with the notional amounts. The notional amount is the amount of a derivative’s underlying asset, reference
rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of
transactions outstanding as of December 31, 2007 and 2006 and are not indicative of either market risk or credit risk (amounts in thousands,
except average forward rate).
2007
Average Notional
Assets Liabilities Forward Rate Amount*
Freestanding derivatives:
Currency forwards
BUY:
USD P405 P4,393 41.42 27,639
EUR 279 – 41.90 353
JPY – 5,727 111.61 1,000,000
Others 151 – – 686
SELL:
USD 86,019 11,777 41.66 153,965
EUR 410 4,262 1.45 10,300
Others 175 938 – 420,154
Cross currency swaps 971,533 – 56.34 53,253
Embedded derivatives:
Currency forwards 51,325 – – 3,823
Credit default swaps 63,000 40,515 – 171,700
P1,173,297 P67,612
* The notional amounts pertain to the original currency except for the ‘Others’ and the Embedded derivatives, which represent the equivalent US$ amounts.

2006
Average Notional
Assets Liabilities Forward Rate Amount*
Freestanding derivatives:
Currency forwards
BUY:
USD P267 P– 49.00 2,855
JPY – 5,160 117.40 1,130,000
CAD 61 – 1.16 1,500
Others 87 486 – 2,698
SELL:
USD 74,442 510 49.34 163,000
EUR 1,216 289 1.32 5,900
JPY 68 – 117.42 15,000
Others 1,676 188 – 6,492
Cross currency swaps 768,367 – 56.34 53,253
Embedded derivatives:
Currency forwards 8,101 – – 446
Credit default swaps 106,782 – – 121,700
P961,067 P6,633
The notional amounts pertain to the original currency except for the ‘Others’ and the Embedded derivatives, which represent the equivalent US$ amounts.

On March 2, 2004, the Parent Company entered into a cross currency swap agreement with a counterparty bank in which the proceeds from
the Notes were swapped for USD. The USD amounts were then invested by the Parent Company in ROP and US Treasury bonds. Under the
swap agreement, the Parent Company is committed to sell USD and buy PHP in 2009 at a specified exchange rate. On a semi-annual basis,
the Parent Company pays 5.66% on the USD leg and receives 12.50% on the PHP leg. The aggregate notional amount of the cross currency
swap is US$53.3 million or P3.0 billion while its positive fair value amounted to P971.5 million and P768.4 million as of December 31, 2007
and 2006, respectively.
 BREAKTHROUGH ON ALL FRONTS 115

The Parent Company enters into certain financial and non-financial contracts that contain embedded derivatives which are treated as separate
derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried
at FVPL. Such derivatives include conversion options in convertible debt instruments, credit default swaps and foreign-currency derivatives
in structured notes and deposits, call and put options in investment securities and loans and receivables, bond-linked deposits, and foreign
currency derivatives on non-financial contracts such as purchase orders and service agreements.

Embedded derivatives that have been bifurcated are credit derivatives in structured notes and interbank receivables with a notional reference
of US$171.7 million and US$121.7 million with a positive fair value of P63.0 million and P106.8 million as of December 31, 2007 and 2006,
respectively, and currency forwards in purchase and service contracts with a notional reference of US$3.8 million and US$0.4 million with
positive fair value of P51.3 million and P8.1 million as of December 31, 2007 and 2006, respectively.

31. Earnings Per Share

The earnings per share of the Group, attributable to equity holders of the Parent Company, are calculated as follows:

2007 2006 2005

a) Net income attributable to equity holders of the
Parent Company (in thousand pesos) P1,490,157 P814,435 P620,921
Less income attributable to convertible preferred stocks classified
as equity (in thousand pesos) 82,427 77,228 160,565
b) Net income attributable to common shareholders P1,407,730 P737,207 P460,356
c) Weighted average number of common shares for basic earnings per share 578,620,561 518,888,165 425,009,703
d) Effect of dilution:
Convertible preferred shares 31,708,688 54,357,751 148,236,213
e) Adjusted weighted average number of common shares
for diluted earnings per share 610,329,249 573,245,916 573,245,916
f) Basic earnings per share (b/c) P2.43 P1.42 P1.08
g) Diluted earnings per share (a/e) 2.43 1.42 1.08

32. Maturity Profile of Assets and Liabilities

The following table shows an analysis of assets and liabilities of the Group and Parent Company analyzed according to whether they are
expected to be recovered or settled within one year and beyond one year from balance sheet date (amounts in thousand pesos):

Consolidated
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Financial Assets
Cash and other cash items P4,773,212 P– P4,773,212 P4,820,155 P– P4,820,155
Due from BSP 27,961,521 – 27,961,521 12,566,759 – 12,566,759
Due from other banks 3,962,000 – 3,962,000 3,555,603 – 3,555,603
Interbank loans receivable 13,197,201 – 13,197,201 22,412,817 – 22,412,817
Securities held under agreements to resell 11,200,000 – 11,200,000 15,700,000 – 15,700,000
Financial assets at FVPL 3,215,235 – 3,215,235 1,137,835 – 1,137,835
Loans receivables - gross (Note 9) 28,096,152 36,692,303 64,788,455 38,175,846 24,012,107 62,187,953
Unquoted debt securities
classified as loans (Note 9) 8,842,266 1,042,982 9,885,248 11,208,371 10,093,353 21,301,724
Other receivables - gross (Note 9) 9,382,111 4,978,469 14,360,580 11,826,731 2,316,895 14,143,626
Receivables from SPV – 726,095 726,095 – 1,361,074 1,361,074
AFS investments - gross (Note 11) 6,404,732 39,036,189 45,440,921 14,113,947 29,156,291 43,270,238
HTM investments 83,259 362,795 446,054 – 1,554,368 1,554,368
117,117,689 82,838,833 199,956,522 135,518,064 68,494,088 204,012,152
(Forward)
116 P H I L I P P I N E N AT I O N A L B A N K 2 0 0 7 A N N U A L R E P O R T

PHILIPPINE NATIONAL BANK AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Consolidated
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Nonfinancial Assets
Property and equipment - net
At cost P– P821,810 P821,810 P– P730,181 P730,181
At appraised value – 15,681,869 15,681,869 – 15,846,819 15,846,819
Investments in subsidiaries and an associate – 665,123 665,123 – 801,838 801,838
Investment properties - net – 24,799,602 24,799,602 – 24,882,076 24,882,076
Other assets - gross (Note 15)* 993,632 9,897,398 10,891,030 10,513,395 7,152,938 17,666,333
993,632 51,865,802 52,859,434 10,513,395 49,413,852 59,927,247
Less: Allowance for impairment and
credit losses (Note 16) – (12,617,953 ) (12,617,953 ) – (19,924,473 ) (19,924,473 )
Unearned and other
deferred income (Note 9) (74,069 ) (418,894 ) (492,963 ) – (543,861 ) (543,861 )
(74,069 ) (13,036,847 ) (13,110,916 ) – (20,468,334 ) (20,468,334 )
P118,037,252 P121,667,788 P239,705,040 P146,031,459 P97,439,606 P243,471,065
* - includes prepaid expenses, intangibles (software), deferred tax assets

Consolidated
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Financial Liabilities
Deposit liabilities P170,218,809 P8,593,160 P178,811,969 P171,498,944 P10,168,748 P181,667,692
Bills and acceptances payable 2,566,945 1,732,149 4,299,094 4,197,881 6,758,067 10,955,948
Subordinated debt – 8,416,424 8,416,424 – 8,389,297 8,389,297
Accounts payable 5,186,627 – 5,186,627 4,129,444 – 4,129,444
Bills purchased - contra 4,159,741 – 4,159,741 2,993,225 – 2,993,225
Managers’ checks and demand
drafts outstanding 450,396 – 450,396 1,987,410 – 1,987,410
Marginal deposits 35,684 – 35,684 506,282 – 506,282
Due to other banks 368,275 – 368,275 436,387 – 436,387
Due to BSP 122,818 – 122,818 114,312 – 114,312
Derivative liabilities 67,612 – 67,612 6,633 – 6,633
Accrued interest payable 491,025 1,562,347 2,053,372 1,019,524 1,555,530 2,575,054
183,667,932 20,304,080 203,972,012 186,890,042 26,871,642 213,761,684
Nonfinancial Liabilities
Accrued taxes and other expenses 1,405,411 815,935 2,221,346 1,695,266 629,107 2,324,373
Other liabilities** 2,536,436 746,128 3,282,564 2,628,733 – 2,628,733
3,941,847 1,562,063 5,503,910 4,323,999 629,107 4,953,106
P187,609,779 P21,866,143 P209,475,922 P191,214,041 P27,500,749 P218,714,790
** - income tax payable, withholding taxes payable, and other tax payable

Parent Company
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Financial Assets
Cash and other cash items P4,732,004 P– P4,732,004 P4,753,539 P– P4,753,539
Due from BSP 27,961,521 – 27,961,521 12,566,759 – 12,566,759
Due from other banks 2,859,908 – 2,859,908 2,314,288 – 2,314,288
Interbank loans receivable 12,824,611 – 12,824,611 22,093,537 – 22,093,537
Securities held under agreements to resell 11,200,000 – 11,200,000 15,700,000 – 15,700,000
Financial assets at FVPL 3,194,086 – 3,194,086 1,109,137 – 1,109,137
Loans receivables - gross (Note 9) 27,085,816 35,771,769 62,857,585 37,581,739 22,714,738 60,296,477
(Forward)
 BREAKTHROUGH ON ALL FRONTS 117

Parent Company
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Unquoted debt securities
classified as loans (Note 9) P8,878,376 P1,006,872 P9,885,248 P11,208,371 P10,093,353 P21,301,724
Other receivables - gross (Note 9) 7,578,733 4,878,293 12,457,026 10,439,857 3,129,465 13,569,322
Receivables from SPV – 726,095 726,095 – 1,361,074 1,361,074
AFS investments - gross (Note 11) 6,186,893 38,393,533 44,580,426 12,111,477 29,156,290 41,267,767
HTM investments – 362,795 362,795 – 1,420,044 1,420,044
112,501,948 81,139,357 193,641,305 129,878,704 67,874,964 197,753,668
Nonfinancial Assets
Property and equipment - net
At cost – 714,513 714,513 – 663,916 663,916
At appraised value – 15,681,869 15,681,869 – 15,846,819 15,846,819
Investments in subsidiaries and
an associate - gross (Note 13) – 5,381,139 5,381,139 – 5,439,520 5,439,520
Investment properties - net – 24,723,885 24,723,885 – 24,803,748 24,803,748
Other assets – gross (Note 15)* 776,110 9,897,398 10,673,508 9,165,640 8,108,454 17,274,094
776,110 56,398,804 57,174,914 9,165,640 54,862,457 64,028,097
Less: Allowance for impairment and
credit losses (Note 16) – (12,334,508 ) (12,334,508 ) – (19,696,132 ) (19,696,132 )
Unearned and other deferred income (Note 9) – (354,725 ) (354,725 ) – (431,438 ) (431,438 )
– (12,689,233 ) (12,689,233 ) – (20,127,570 ) (20,127,570 )
P113,278,058 P124,848,928 P238,126,986 P139,044,344 P102,609,851 P241,654,195
* - includes prepaid expenses, intangibles (software) and deferred tax assets - net

Parent Company
2007 2006
Less than Over Less than Over
Twelve Months Twelve Months Total Twelve Months Twelve Months Total
Financial Liabilities
Deposit liabilities P172,297,515 P8,593,158 P180,890,673 P173,564,214 P10,168,750 P183,732,964
Bills and acceptances payable 1,844,935 1,629,513 3,474,448 3,603,647 6,758,068 10,361,715
Subordinated debt – 8,416,424 8,416,424 – 8,389,297 8,389,297
Accounts payable 5,093,465 – 5,093,465 3,503,276 – 3,503,276
Bills purchased - contra 4,159,741 – 4,159,741 2,993,225 – 2,993,225
Managers’ checks and demand
drafts outstanding 450,396 – 450,396 1,987,410 – 1,987,410
Marginal deposits 35,684 – 35,684 506,282 – 506,282
Due to other banks 301,322 – 301,322 413,096 – 413,096
Due to BSP 122,818 – 122,818 114,312 – 114,312
Derivative liabilities 67,612 – 67,612 6,633 – 6,633
Accrued interest payable 491,025 1,555,449 2,046,474 1,024,318 1,555,464 2,579,782
184,864,513 20,194,544 205,059,057 187,716,413 26,871,579 214,587,992
Nonfinancial Liabilities
Accrued interest and other expenses 1,336,917 782,774 2,119,691 1,598,945 645,083 2,244,028
Other liabilities** 1,011,573 717,644 1,729,217 – 1,557,604 1,557,604
2,348,490 1,500,418 3,848,908 1,598,945 2,202,687 3,801,632
P187,213,003 P21,694,962 P208,907,965 P189,315,358 P29,074,266 P218,389,624
** - includes income tax payable, withholding taxes payable, and other tax payable

33. Notes to Statements of Cash Flows

The amounts of due from BSP and interbank loans receivable which have original maturities of more than three months are as follows:

2007 2006
(Amounts in Thousand Pesos)
Due from BSP P12,700,000 P–
Interbank loans and receivables – 3,151,961
118 P H I L I P P I N E N A T I O N A L B A N K

Management DIRECTORY

ASSET MANAGEMENT SECTOR First Vice Presidents Assistant Vice Presidents

9th Floor PNB Financial Center Bernard M. Carague Modette Ines V. Carino
Elisa M. Cua Susan R. Cervantes
Senior Vice President Caesar M. Leopando Noel R. Godoy
Christian Jerome O. Dobles Nicardo M. Leopoldo Teresita M. Paradero
Alfonso C. Tanseco
First Vice Presidents
Rolando Z. Delfino Vice Presidents CORPORATE PLANNING
Florencio C. Lat Novel G. Fortich & RESEARCH DIVISION
Nixon S. Ngo Cynthia B. Lanot 9th Floor PNB Financial Center

Vice Presidents Senior Assistant Vice Presidents First Vice President

Aquilino B. Mangahas Allan L. Ang Emeline C. Centeno
Ma. Consolacion E. Pingol Roy D. Arpon
Armando A. Inabangan, Jr. Senior Assistant Vice President
Assistant Vice Presidents Remedios D. Nisce
Janette Y. Abad Santos Assistant Vice President
Victoria V. Aquino Marie Grace Nina P. Marcelo
Nestor C. Del Carmen, Jr. FACILITIES ADMINISTRATION
Leonardo F. Dimaranan GROUP
Antonio A. Lim CONSUMER BANKING SECTOR 2nd Floor PNB Financial Center
Therese A. Ong 2nd Floor PNB Financial Center
Tene O. Paraiso First Vice President
Eranio Q. Pascual First Senior Vice President Augusto B. Dimayuga
Ponciano D. Quinio Jovencio B. Hernandez
Assistant Vice Presidents
First Vice President Nilo J. Nava
BUSINESS DEVELOPMENT Emmanuel A. Tuazon Ferdinand R. Balcueva
SECTOR
7th Floor PNB Financial Center Vice President
Norman Vic C. Aycocho FINANCIAL MANAGEMENT
Executive Vice President AND CONTROLLERSHIP SECTOR
Ma. Elena B. Piccio Senior Assistant Vice Presidents 10th / 7th Floors PNB Financial
Elmer M. Aquino Center
Senior Vice Presidents Dante G. Cruz
Manuel S. Banayad Executive Vice President
Renato M. Estrada
Josefino R. Gamboa Carmen G. Huang
Amy Lee M. Gotianse
Jose Alvaro D. Rubio Mary Anne Claire D. Nery
Victorio C. Sison Senior Vice Presidents
Ligaya R. Gagolinan
Maria Paz D. Lim
Marlyn M. Pabrua
 2007 ANNUAL REPOR T 119

First Vice Presidents Vice Presidents Vice Presidents

Marilyn A. Asuncion Rachelle D. Datuin Ma. Cecilia D. Regalario
Udela C. Salvo Joanne Y. Gohoc Cesar V. Villegas
Julian M. Martinez
Vice Presidents Evelyn C. Ylagan Senior Assistant Vice Presidents
Roberto T. Cruz Antonio M. Alcaraz
Renato S. Del Mundo Senior Assistant Vice Presidents Edgardo D. Del Castillo III
Elise Rue G. Alegre Helen Grace D. Gavica
Senior Assistant Vice Presidents Marilyn Prescilla O. Aguas Armando R. Remigio, Jr.
Marilou V. Ruiz Amador G. Astudillo, Jr. Elizabeth S. Salindo
Julian B. Soriano Pacita B. Castro
Ginina C. Trazo Maria Isabel S. Gonzales Assistant Vice Presidents
Rex David C. Israel Winny U. Canete
Assistant Vice Presidents Lilia M. Lichauco Philip A. Driz
Limwel M. Caparros Lorna G. Santos Ronaldo D. Dugenia
Virgilio C. Fabularum Emerito L. Sapinoso Joel H. Maling
Judah Ben-Hur C. Relativo
Assistant Vice Presidents
Isidore G. Bada HUMAN RESOURCE GROUP
GLOBAL OPERATIONS SECTOR Jaime F. Faigao 7th Floor PNB Financial Center
3rd Floor PNB Financial Center Allan M. Geronimo
Jesus D. Hernandez First Senior Vice President
Executive Vice President Ma. Arlene Mae G. Lazaro Edgardo T. Nallas
Anthony Q. Chua Enrique G. Llagas
Arnel A. Mariano First Vice Presidents
Senior Vice President Eril P. Recalde Schubert Caesar C. Austero
Ricardo C. Ramos Samuel L. Tan Romeo G. De La Rosa
Robert John R. Tolentino
First Vice Presidents Senior Assistant Vice Presidents
Loreto M. Arenas Antonio Joseph E. Mines
Manuel Nicolas G. Borja GLOBAL TECHNOLOGY SECTOR Roderick R. Soriano
Teresita S. Cruz 2th Floor PNB Financial Center
David Stephen T. Cu Assistant Vice President
Marie Fe Liza S. Jayme Executive Vice President Czarina S. Ong
Carmen Jazmin F. Lao Cynthia V. Javier
John Howard D. Medina
Ma. Cirila B. Panganiban Senior Vice President
Ma. Patricia N. Tan Roland V. Oscuro
Daniel M. Yu
First Vice President
Jacinto C. Mendoza
120 P H I L I P P I N E N A T I O N A L B A N K

Management DIRECTORY

COMPLIANCE DIVISION Assistant Vice President Assistant Vice Presidents

11th Floor PNB Financial Center Alvin I. Kong Mario Luis P. Cruel
Rosario C. De Leon
Senior Assistant Vice President Ma. Odelette C. Encarnacion
Alegria D. Sarto LEGAL GROUP Lorna S. Gamboa
9th Floor PNB Financial Center Ma. Lourdes P. Dela Cruz

INTERNAL AUDIT GROUP First Senior Vice President &

11th Floor PNB Financial Center Chief Legal Counsel REMEDIAL MANAGEMENT
Alvin C. Go SECTOR
First Senior Vice President
7th Floor PNB Financial Center
Cris S. Cabalatungan First Vice Presidents
Diego A. Allena, Jr. Executive Vice President
First Vice President Eulogia M. Cueva Renato A. Castillo
Lino S. Carandang
Vice Presidents Senior Vice Presidents
Senior Assistant Vice Presidents Alexander E. Bacarro Aida M. Padilla
Jose D. Bautista Manuel C. Bahena, Jr. Rex G. Sayson
Vicente S. Pagdatoon II
Senior Assistant Vice Presidents First Vice Presidents
Assistant Vice President Eligio P. Petilla Rowena E. Magpayo
Rosario S. Dela Rosa Edgardo V. Satur Orlando B. Montecillo

Vice President
INTERNATIONAL BANKING AND OFFICE OF THE CHIEF Jeffrey R. Abacan
OVERSEAS REMITTANCE SECTOR CREDIT OFFICER
3rd Floor PNB Financial Center 7th Floor PNB Financial Center Senior Assistant Vice Presidents
Nelson C. Tablizo
First Senior Vice President Executive Vice President Ted Edward R. Tolentino
Isabelita M. Watanabe Renato A. Castillo
Assistant Vice Presidents
First Vice Presidents First Vice Presidents Alfredo C. Aram
Romulo Rodel C. Bicol Angeles Z. Lorayes Ricardo B. Casacop
Ramon B. Murillo Nanette O. Vergara Ricardo V. De Leon
Mariza L. Tiburcio
Vice President Vice President
Mercedes J. Fabie Maria Rita S. Pueyo

Senior Assistant Vice President

Mercy G. Gamboa
 2007 ANNUAL REPOR T 121

RETAIL BANKING SECTOR TREASURY SECTOR Senior Assistant Vice Presidents

9th Floor PNB Financial Center 3rd Floor PNB Financial Center Mario R. Enriquez
Conrado Alberto G. Vasquez III
First Senior Vice President First Senior Vice President
Rafael Z. Sison, Jr. Ramon L. Lim Assistant Vice President
Lilia P. Estrada
First Vice Presidents Senior Vice Presidents
Narciso S. Capito, Jr. Ponciano C. Bautista, Jr.
Eduardo R. Flores Esther F. Capule OFFICE OF THE CORPORATE
Maria Luisa S. Toribio SECRETARY
Vice Presidents 9th Floor PNB Financial Center
Senior Assistant Vice Presidents Danilo B. Endaya
Miguel P. Reyes Felix Cesar L. Zerrudo, Jr. Corporate Secretary
Hernando D. Valmores, Jr. Renato J. Fernandez
Senior Assistant Vice President
Assistant Vice Presidents Lariza B. Llanes Senior Assistant Vice President
Roy O. Sapanghila Ma. Socorro Antoniette G. Marquez
Marilyn M. Yap Assistant Vice Presidents
Victoria L. Guevara
Melita R. Sarmiento OFFICE OF THE PRESIDENT
RISK MANAGEMENT GROUP Cristina G. Sullano 10th Floor PNB Financial Center
11th Floor PNB Financial Center
President
Senior Vice President TRUST BANKING GROUP Omar Byron T. Mier
Carmela A. Pama 3rd Floor PNB Financial Center
Vice President
Senior Assistant Vice President First Senior Vice President Leonor A. Aquino
Luis A. Jacinto Ma. Elena S. Sarmiento
Senior Assistant Vice President
Assistant Vice President Senior Vice President Ma. Cristina M. Advincula
Sofia C. Ladores Rogel L. Zenarosa

First Vice President BANK SECURITY OFFICE

Emma C. See Basement PNB Financial Center

Vice Presidents Senior Assistant Vice President

Josephine E. Jolejole Ruben A. Zacarias
Arsenia L. Matriano
122 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

DOMESTIC AYALA
G/F Manila Bank Building
BLUMENTRITT
Kassco Bldg. cor. Lico & Cavite Sts.
METRO MANILA BRANCHES 6772 Ayala Avenue, Makati City Rizal Ave., Sta. Cruz, Manila
Tel. No.: 894-1432 Tel. No.: 732-7156
ALABANG Fax No.: 817-9936 Fax No.: 732-7150
G/F Page 1 Building Email add: [email protected] Email add: [email protected]
Acacia Avenue, Madrigal Business Park
Alabang, Muntinlupa City JULIETA F. CRUZ PAMELA F. PASCUAL
Tel. No.: 807-6065 Business Manager Business Manager
Fax No.: 842-3610
Email add: [email protected] BANGKAL BONI AVENUE
G/F, Hernandez Building Jo-Cel Building, 523 Boni Ave.
NANETTE J. JAVELLANA 1646 Evangelista St. Cor. San Roque St., Mandaluyong City
Business Manager Bangkal, Makati City Tel. No.: 531-3158
Tel. Nos.: 889-03-96 / 889-0395 Fax No.: 531-1913
ALI MALL Fax No.: 889-0389 Email add: [email protected]
Ali Mall II Building, Gen. Romulo Ave. Email add: [email protected]
Cor. P. Tuazon Blvd., Cubao, QC EDUARDO S. PADILLA
Tel. No.: 912-1655 ROZETTE E. UY Business Manager
Fax No.: 912-6654 Business Manager
Email add: [email protected] BSP SERVICE UNIT
BATASANG PAMBANSA G/F Caferorium Bldg., Bangko Sentral ng
DALIA B. ELAZEGUI 2/F South Wing Building Pilipinas Complex, Malate, Manila
Business Manager Batasang Pambansa Complex Tel No.: (02) 523-93-28
Constitutional Hills, Quezon City Email add: [email protected]
ALMANZA Tel. Nos.: 951-7591 / 931-6682
Hernz Arcade, Alabang-Zapote Road Fax No.: 951-7590 LORENA L. DIAZ
Almanza, Las Pinas City Email add: [email protected] Business Manager
Tel. No.: 806-6905
Fax No.: 800-0597 RAMIR T. SORIANO CALOOCAN
Email add: [email protected] Business Manager Gen. San Miguel St., Caloocan City
Tel. Nos.: 288-2446 / 288-2450
ELEANOR M. MACARIOLA BENAVIDEZ Email add: [email protected]
Business Manager Unit 103, 1 Corporate Plaza
Benavidez Street, Legaspi Village, Makati City PABLO C. SANTOS, JR.
ANTIPOLO Tel. No.: 840-3040 Business Manager
No. 6 Circumferential Rd., Poblacion Fax No.: 840-3038
Antipolo, Rizal Email add: benavidez@ pnb.com.ph CARTIMAR TAFT
Tel. No.: (02) 697-2016 SATA Corp. Building
Fax No.: (02) 697-2015 ROXANNE A. FELICIANO 2217 Taft Avenue, Pasay City
Email add: [email protected] Business Manager Tel. No.: 834-0765
Fax.: 833-2268
SALVADOR E. MANLANGIT BICUTAN Email add: [email protected]
Business Manager G/F, VCD Bldg., 89 Doña Soledad Avenue
Better Living Subd., Bicutan MYRNA C. PANTALLA
ARANETA AVENUE Parañaque Business Manager
128 G. Araneta Ave., Quezon City Tel. Nos.: 824-5164 / 776-2929
Tel. No.: 714-1146 Fax No.: 824-4954 C.M. RECTO
Fax No.: 714-1144 Email add: [email protected] Unit 6 & 7 Phil. Society
Email add: [email protected] for the Prevention of Cruelty to Animals
DAISY QUINTOS Bldg., C.M. Recto Ave., Manila
MANUEL L. MARAVILLO Business Manager Tel. No.: 734-0599
Business Manager Fax No. 734-8718
BINONDO Email add: [email protected]
AVENIDA 452 San Fernando St.
720 Rizal Avenue, Sta. Cruz, Manila Cor. Elcano St. Binondo, Manila MA. CONSUELO A. SUANDING
Tel. No.: 733-0717 Tel. No.: 242-8449 Business Manager
Fax No.: 733-0716 Fax No.: 242-8450
Email add: [email protected] Email add: [email protected]

RHODORA AZUCENA F. MANAHAN (ACTING) ANABELLE B. LIM

Business Manager Business Manager
 2007 ANNUAL REPOR T 123

COA EDISON-BUENDIA EVER-GOTESCO

COA Building, G/F Visard Building Lower Ground Floor, Stall No. 20
Commonwealth Avenue, Quezon City 19 Sen. Gil Puyat Avenue, Makati City Ever-Gotesco, Commonwealth Ave.
Tel. No.: 951-8092 Tel. No.: 844-9958 Quezon City
Fax No.: 932-9027 Fax No.: 844-9956 Tel. Nos.: 932-6633 / 951-7342
Email add: [email protected] Email add: [email protected] Fax No.: 932-3789
Email add: [email protected]
FERDINAND V. ATIENZA ROBERTO H. MENDOZA, JR.
Business Manager Business Manager GUIA A. VELILLA
Business Manager
COMMONWEALTH EDSA-ROOSEVELT
Ground Floor KC Square Building 1029 EDSA (between Roosevelt Ave. FAIRVIEW
529 Commonwealth Ave., Quezon City & Bansalangin St.) Quezon City LGM 3 & 3B Fairview Center Mall
Tel. No.: 932-8431 Tel. No.: 372-1333 Don Mariano Ave. cor. Regalado St.
Fax No.: 932-1959 Fax No.: 3745-290 Fairview, Quezon City
Email add: [email protected] Email add: [email protected] Tel. Nos.: 939-8003 / 431-2980
Fax No.: 431-2955
MARIE GRACE H. ACERA IMELDA G. DATUIN (ACTING) Email add: [email protected]
Business Manager Business Manager
JAMES D. BALUYAN
CUBAO ERMITA Business Manager
Aurora Blvd., Cubao, Quezon City 1337 A. Mabini St. Ermita, Manila
Tel. Nos.: 912-1940 / 911-2919 Tel. Nos.: 526-6585 / 526-6589 FELIX AVENUE
912-1942 / 911-2920 521-7166 / 526-0853 F. P. Felix Avenue, Cainta, Rizal
Fax No.: 912-19-31 Fax No.: 526-1350 Tel. No.: 645-7341
Email add: [email protected] Email add: [email protected] Fax No.: 645-6026
Email add: [email protected]
LILIBETH A. LANDICHO LAUDICO D. NICDAO
Business Manager Business Manager ELIZABETH G. GONZALES
Business Manager
DELTA E. RODRIGUEZ SR.-BANAUE
101-B Delta Building, West Ave. 97 Eastern Construction Co. Inc. (ECCOI) FRISCO
cor., Quezon Blvd. Quezon City Bldg. E. Rodriguez Sr. Ave., Quezon City 137 Unit E & F, MCY Realty Building
Tel. Nos.: 372-1542 / 372-1313 Tel. Nos.: 740-7873 / 740-7874 Roosevelt Ave., Quezon City
Fax No.: 372-1539 Fax No.: 740-7874 Tel. No.: 373-6604 / 373-6605
Email add: [email protected] Email add: [email protected] 371-5292
Fax No.: 373-6603
JUANA M. ARGOSINO HELENA ROWENA C. ABANTO (ACTING) Email add: [email protected]
Business Manager Business Manager
MA. GRACIA D. PANOTES
DIVISORIA ESCOLTA Business Manager
869 Sto. Cristo St., San Nicolas G/F Regina Building
Binondo, Manila 324 Escolta, Sta. Cruz, Manila FTI
Tel. Nos.: 242-8135 / 247-2012 Tel. No.: 241-4239 / 241-4240 G/F FTI Administration Building
Email add: [email protected] Fax No.: 241-4444 FTI Complex, Taguig 1633
Email add: [email protected] Tel. No.: 838-5495 / 838-5496
JOHN GLENN A. ADVIENTO (ACTING) Fax No.: 837-0082
Business Manager MANUELITO C. MONTEVERDE Email add: [email protected]
Business Manager
DPWH ANTONIO C. MARQUEZ (ACTING)
DPWH Compound, A. Bonifacio St. ESPAÑA Business Manager
Intramuros Port Area, Manila Dona Anacleta Building, Espana corner
Tel. Nos.: 527-4094 / 527-9666 Galicia Streets, Sampaloc, Manila GALAS
Fax No.: 527-4094 Tel. Nos.: 735-6590 / 735-6592 20 Bayani St., Galas, Quezon City
Email add: [email protected] Fax No.: 735-6591 Tel. No.: 781-9477 / 781-9475
Email add: [email protected] Fax No.: 781-9476
ALEXANDER D. PASTOR Email add: [email protected]
Business Manager LAMBERTO G. ALVAREZ
Business Manager DANIEL S. CALALANG
Business Manager
124 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

GILMORE INTRAMUROS LAGRO
G/F Gilmore I.T. Center, 1st Street cor. G/F Marine Technology Foundation Bldg. JTM Bldg., Regalado Ave., Neopolitan Subd.
Gilmore Ave. New Manila, Quezon City Aduana cor. Arsobispo Sts. North Fairview, Quezon City
Tel. No.: 721-2787 Intramuros, Manila Tel. Nos.: 930-31-05 / 930-3106
Fax No.: 722-2479 Tel. No.: 527-7385 Fax No.: 936-7303
Email add: [email protected] Email add: [email protected] Email add: [email protected]

MA. SOPHIA C. MENDIOLA LUCIBAR T. PEROCHO LILIBETH P. BARCELONA

Business Manager Business Manager Business Manager

GRACE PARK ISETANN-CINERAMA LAON LAAN

383 Rizal Ave Ext. Isetann-Cinerama Complex G/F Elegance Mansion
(between 10th & 11th Ave.) C.M. Recto Ave. cor. Quezon Blvd. 1465 -71 Alfredo cor. Laon Laan Sts.
Grace Park, Caloocan Quiapo, Manila Sampaloc, Manila
Tel. No.: 365-8578 Tel. No.: 735-1254 / 733-7711 Tel. Nos.: 732-9617 / 743-1355
Fax No.: 365-6173 733-4973 Fax No.: 749-0038
Email add: [email protected] Fax No.: 733-7711 Email add: [email protected]
Email add: [email protected]
CARINA B. DAVID (ACTING) NORA ELENA M. CASTILLO
Business Manager EDUARD M. SOLOMON Business Manager
Business Manager
GREENHILLS LAS PIÑAS
G/F One Kennedy Place, Club Filipino Ave. JUAN LUNA BRANCH 19 Alabang Zapote Road
Cor. Ortigas Ave, San Juan 451 Juan Luna St. Binondo, Manila Pamplona II, Las Piñas City
Tel. No.: 725-5084 / 725-5929 Tel No.: 242-8452 Tel. Nos.: 871-9745 / 871-3149
Fax No.: 725-4341 Fax No.: 242-8451 Email add: laspiñ[email protected]
Email add: [email protected] Email add: [email protected]
LANI Q. BALAQUIAO
RHONA H. YLAGAN TOMAS D. PIMENTEL Business Manager
Business Manager Business Manager
LEGASPI VILLAGE
GSIS KALENTONG G/F FGLA Building, 174 Salcedo St.
Level 1 GSIS Bldg. Financial Complex First of Shaw Building, #1 Shaw Blvd. Legaspi Village, Makati City
Pasay City Daang Bakal, Mandaluyong City Tel. Nos.: 893-7841 / 893-6783
Tel. No.: 891-6345 / 891-6161 Tel. No.: 534-1908 / 534-1909 Fax No.: 892-7856
locals 4696 & 4063 Fax No.: 533-9484 Email add: [email protected]
Fax No.: 891-6345 Email add: [email protected]
Email add: [email protected] MAILA B. LIWAG (ACTING)
MA. THERESA L. MARIANO Business Manager
GUADALUPE Business Manager
23 PACMAC Bldg, EDSA, Guadalupe LUNETA
Makati City 1212 KAPASIGAN NHI Compound, T.M. Kalaw St., Manila
Tel. No.: 882-1904 / 882-4336 Emiliano A. Santos Bldg., A. Mabini St. Tel. No.: 524-4774
Email add: [email protected] cor. Sixto Antonio Ave., Pasig City Fax No.: 524-2879
Tel. No.: 641-0623 / 641-0425 Email add: [email protected]
EDGARDO N. ALEJANDRO Fax No.: 641-0424
Business Manager Email add: [email protected] DELIA F. VILLANUEVA
Business Manager
HARRISON PLAZA INOCENCIO T. CABELLO
Ninoy Aquino Memorial Sports Complex Business Manager MABUHAY ROTONDA
Adriatico St., Malate 30 G/F EU State Tower, Quezon Ave.
Tel. No.: 525-2527 / 525-2462 KATIPUNAN Quezon City
Fax No.: 525-2489 335 Katipunan Ave., Loyola Heights Tel. Nos.: 740-5259 / 743-0819
Email add: [email protected] Quezon City Fax No.: 743-0819
Tel. Nos.: 433-2021 / 426-6964 Email add: [email protected]
ERNESTO V. PAULINO Fax No.: 433-2022
Business Manager Email add: [email protected] CARLITO J. FABROS
Business Manager
ROSEMARIE S. CARMONA
Business Manager
 2007 ANNUAL REPOR T 125

MAIN BRANCH MANDALUYONG MUNTINLUPA

3/F PNB Financial Center 471 Shaw Boulevard G/F Palmero Building
Pres. Diosdado Macapagal Blvd., Pasay City Mandaluyong City No. 22 National Road, Putatan
Tel. Nos.: 526-3247 / 526-3131 loc 4680 Tel. No.: 533-6013 Muntinlupa City, 1772
Fax No.: 551-5816 Fax No.: 533-9233 Tel. No.: 861-2990
Email add: [email protected] Email add: [email protected] Fax No.: 862-2635
Email add: [email protected]
ELYNOR P. IMPERIO JOSE ANGELO G. DIAZ
Business Manager Business Manager MA. CHRISTINA A. DE GUZMAN
Business Manager
MAKATI AVENUE MARIKINA
G/F, Petron Mega Plaza Building Cor. Shoe Ave., & W. Paz St. MWSS
358 Senator Gil Puyat Avenue Sta. Elena, Marikina MWSS Compound, Katipunan Road
Makati City, 1210 Tel. Nos.: 646-1915 / 646-1916 Balara, Quezon City
Tel. No.: 886-3383 682-3055 Tel. Nos.: 927-5443 / 922-3765
Fax No.: 886-3372 Fax No.: 681-0701 Fax No.: 922-3764
Email add: [email protected] Email add: [email protected] Email add: [email protected]

ANNABELLE L. DOMINGO MERLY I. MERCADO OFELIA H. DAWAY

Business Manager Business Manager Business Manager

MAKATI POBLACION MARULAS NAIA

Cor. J.P. Rizal & N. Garcia Sts. No. 8 AGS Bldg., McArthur Highway Arrival Area Lobby; NAIA Complex
Makati City Marulas. Valenzuela City NAIA, Pasay City
Tel. No.: 899-1430 Tel. Nos.: 444-6263 / 294-5526 Tel. No.: 879-6040
Fax No.: 897-9932 Fax No.: 291-2742 Fax No.: 831-2640
Email add: makatipoblacion@ pnb.com.ph Email add: [email protected] Email add: [email protected]

VIRLIE MAE C. ENCISA ELMER H. NUCUM (ACTING) FRANCISCO C. BUENAFLOR (ACTING)

Business Manager Business Manager Business Manager

MALABON MASINAG NFA BRANCH

F. Sevilla Ave., Malabon City Silicon Valley Bldg., 169 Sumulong Highway Sugar Regulatory Administration (SRA) Bldg.
Tel. No.: 282-3856 Masinag, Antipolo, Rizal North Ave., Diliman, Quezon City
Fax No.: 282-3857 Tel. Nos.: 682-3012 / 681-5846 Tel. No.: 928-3582
Email add: [email protected] Fax No.: 681-5846 Fax No.: 928-3604
Email add: [email protected] Email add: [email protected]
MERCEDITA B. CRUZ
Business Manager MARCELINO M. BERNARDO MYRA N. MORENO
Business Manager Business Manager
MALACAÑANG
Malacañang Annex, Old Sta. Mesa Cpd. MAYPAJO NIA
J.P. Laurel St., San Miguel, Manila Xavier Bldg., 191 A. Mabini St. NIA Compound cor. EDSA
Tel. No.: 735-8913 Maypajo, Kalookan City Diliman, Quezon City
Email Add: [email protected] Tel. No.: 287-21-17 Tel. Nos.: 927-4391 / 927-2987
Fax No.: 288-67-29 Fax No.: 928-6776
JESSICA R. RAMORAN Email add: [email protected] Email add: [email protected]
Business Manager
CYNTHIA C. WOO LOLITA M. LEYSON (ACTING)
MALATE Business Manager Business Manager
SM Lazo Medical Center Inc. Building
1755 Taft Ave., cor. J. Nakpil St., Malate MONUMENTO NOVALICHES
Tel. Nos.: 524-2568 / 528-0708 D & I Building, 419 EDSA, Kalookan City 513 Quirino Highway, Talipapa
Fax No.: 528-0708 Tel. No.: 361-9743 Novaliches, Quezon City
Email add: [email protected] Fax No.: 361-6448 Tel. Nos.: 984-0024 / 98-40027
Email add: [email protected] Fax No.: 984-0024
CELSO G. ESPIRITU Email add: [email protected]
Business Manager ROSALIE R. CAÑARE
Business Manager LILIA M. CRUZ
Business Manager
126 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

NPC PASIG PROJECT 8
Agham Road, East Triangle, Diliman G/F Westar Bldg., 611 Shaw Blvd. Mecca Trading Bldg.
Quezon City Pasig City Congressional Ave.
Tel. No.: 927-8829 Tel. Nos.: 631-4001 / 631-4002 Project 8, Quezon City
Fax No.: 927-8790 Fax No.: 631-3996 Tel. Nos.: 426-2235 / 924-2563
Email add: [email protected] Email add: [email protected] Fax No.: 426-2233
Email add: [email protected]
OLGA P. TONGCO MA. VICTORIA V. LIWAG
Business Manager Business Manager DULCE S. DINGLASAN
Business Manager
OLYMPIA PCSO
JVIP Bldg., Chino Roces Avenue PCSO Bldg., Quezon Institute Compound QUEZON CITY CIRCLE
Cor. Barasoain & Novaliches Sts. E. Rodriguez Sr. Ave., Quezon City Elliptical Road cor. Kalayaan Avenue
Makati City Tel. No.: 749-0434 Quezon City
Tel. No.: 899-6823 Fax No.: 411-0096 Tel. Nos.: 924-2818 / 922-0560
Fax No.: 897-0982 Email add: [email protected] 924-2661 / 924-2660
Email add: [email protected] 924-2813
JOCELYN B. JOSE Fax No.: 924-2662
BENEDICTO G. ARENILLO, JR. Business Manager Email add: [email protected]
Business Manager
PGH AURORA V. ARENAS
ORTIGAS PGH Compound, Taft Avenue, Manila Business Manager
JMT Building, ADB Avenue Tel. Nos.: 522-0002 / 524-3558
Ortigas Business Complex, Pasig City Fax No.: 524-3565 RETIRO
Tel. Nos.: 633-8194 / 633-8712 Email add: [email protected] Edificio Enriqueta Building
633-8713 422 Amoranto cor. D. Tuazon
Fax No.: 631-6250 ROLAND J. BUENDIA Quezon City
Email add: [email protected] Business Manager Tel. Nos.: 743-6360 / 732-9067
Fax No.: 732-9067
SONIA D. CADAY PLAZA STA. CRUZ Email add: [email protected]
Business Manager 548 Florentino Torres St.
Cor. Ronquillo St., Sta. Cruz, Manila REY C. LLANES (ACTING)
PACO Tel. Nos.: 734-2463 / 715-2053 Business Manager
1818 A. Linao St., Paco, Manila Fax No.: 734-2464
Tel. Nos.: 400-7883 / 523-7428 Email add: [email protected] RIZAL AVENUE
Fax No.: 521-7778 Cor. Rizal Ave. & S. Herrera Sts.
Email add: [email protected] MA. LILIBETH B. BORJA Sta.Cruz, Manila
Business Manager Tel. No.: 254-2519
CECILE AGNES C. BUGAYONG (ACTING) Fax No.: 254-2520
Business Manager PORT AREA Email add: [email protected]
G/F Port of Manila Bldg.
PANDACAN Bureau of Customs Compound ERNESTO A. SAMSON
Cor. T. Luis & De Jesus Sts. Port Area, Manila Business Manager
Pandacan Manila Tel. Nos.: 527-4433 / 527-4434
Tel. No.: 563-1031 527-2410 ROSARIO (PASIG)
Fax No.: 564-0870 Fax No.: 527-4432 Ortigas Avenue Extension
Email add: [email protected] Email add: [email protected] Barangay Sta. Lucia, Pasig City
Tel. Nos.: 656-1235 / 656-6669
ARLENE A. LEAÑO ANNA LIZA A. ARELLANO 656-9124
Business Manager Business Manager Fax No.: 656-9126
Email add: [email protected]
PASAY PRITIL
2976 Mexico Avenue, Pasay City MTSC Bldg., Capulong St. VENICIA L. RANCES
Tel. No.: 832-0391 Cor. Juan Luna St. Tondo, Manila Business Manager
Fax No.: 831-5264 Tel. Nos.: 252-9639 / 252-9631
Email add: [email protected] 252-2438
Fax No.: 252-9639
JANETH C. NUQUE Email add: [email protected]
Business Manager
BEATRIZ A. DABU
Business Manager
 2007 ANNUAL REPOR T 127

ROXAS BLVD. SSS DILIMAN TUTUBAN-ABAD SANTOS

Suite 101 CTC Bldg., 2232 Roxas Blvd. G/F SSS Building, East Avenue 1450-1452 Abad Santos Avenue
Pasay City Diliman, Quezon City Tondo, Manila
Tel. Nos.: 832-3901 / 832-3902 Tel. Nos.: 433-1710 / 433-1716 / 433-1688 Tel. Nos.: 256-9874 / 256-8846
Fax No.: 832-3902 Fax No.: 928-6460 Fax No.: 256-8905
Email add: [email protected] Email add: [email protected] Email add: [email protected]

MARY ROSE D. GONZALES SILVERIO S. FERNANDEZ LILIA R. ORTIZ

Business Manager Business Manager Business Manager

SALCEDO VILLAGE SUCAT UN AVENUE

G/F The Peak, 107 Alfaro St. Kingsland Bldg., Dr. A. delos Santos Avenue 900 United Nations Avenue
Salcedo Village, Makati City Parañaque City Ermita, Manila
Tel. No.: 848-2574 Tel. Nos.: 825-9058 / 826-1921 Tel. No.: 521-7637
Fax No.: 848-2512 825-2532 / 825-2328 Fax No.: 525-6724
Email add: [email protected] Fax No.: 825-2446 Email add: [email protected]
Email add: [email protected]
ELVIRA S.J. MIRANDA REYNALDO A. TRIAS
Business Manager MARIO M. ALVARAN Business Manager
Business Manager
SAN JUAN U.P. CAMPUS
213 E. Blumentritt cor. L.K. Santos Sts. TANAY Apacible St., UP Campus
San Juan New Market Road.,Bgy. Plaza Aldea Diliman, Quezon City
Tel. No.: 727-3643 Tanay, Rizal Tel. Nos.: 921-8910 / 921-5255
Fax No.: 724-6717 Tel. No.: 654-0211 Fax No.: 921-8272
Email add: [email protected] Fax No.: 654-0221 Email add: [email protected]
Email add: [email protected]
TYRONE D. NAVARRETE HELEN S. COTO
Business Manager JAIME M. CAPISTRANO Business Manager
Business Manager
SAN LORENZO VALENZUELA
926 Jackson Building, Pasay Road TANDANG SORA 313 San Vicente St., Karuhatan
Makati City 102 Tandang Sora Ave., Valenzuela City
Tel. No.: 840-3566 Bgy. Pasong Tamo St. Tel. Nos.: 292-9131 / 292-9133 / 291-2826
Fax No.: 817-9389 Tandang Sora, Quezon City Fax No.: 292-3997
Email add: [email protected] Tel. No.: 935-9481 / 939-5094 Email add: [email protected]
Email add: [email protected]
EDNA T. FERNANDEZ (ACTING) HENRY C. BORNALES
Business Manager MARIO S. ABUDE Business Manager
Business Manager
SEN. GIL PUYAT VILLAMOR AIR BASE
252 Burgundy Corporate Tower TAYTAY Cor. Andrew & Sales Sts.
Gil Puyat Ave., Makati City G/F JC Pascual Bdg., 2 Kadalagahan St. Villamor Air Base, Pasay City
Tel. No.: 889-0658 (beside Municipal Hall) Bgy. Dolores Tel. Nos.: 854-1676 / 831-2881
Fax No.: 844-5709 Taytay, Rizal Fax No.: 832-5360
Email add: [email protected] Tel. Nos.: 660-4620 / 679-2843 (PT&T) Email add: [email protected]
Fax No.: 660-4621
ALEXANDER M. CHENG Email add: [email protected] DOMINGO P. AMABA
Business Manager Business Manager
JOSEPHINE M. CAPITO
SHANGRI-LA PLAZA Business Manager WEST AVENUE
Unit AX-116 P3 Carpark Bldg 92 West Ave., Brgy. Philam, Quezon City
Shangri-la Annex, Shangri-la Plaza Mall TIMOG Tel. Nos.: 929-0433 / 929-8683
Cor. EDSA & Shaw Blvd., Mandaluyong City G/F Newgrange Bldg. Email add: [email protected]
Tel. Nos.: 633-1560 / 633-9224 No. 32 Timog Ave.,
Fax No.: 633-9223 Quezon City BLESILDA S. REYES
Email add: [email protected] Tel. Nos.: 373-9043 to 45 Business Manager
Fax No.: 373-9043
PAMELA P. ROY (ACTING) Email add: [email protected]
Business Manager
RAQUEL S. JIMENEZ
Business Manager
128 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

LUZON BRANCHES BACOOR BANGUED
KM. 17, Aguinaldo Hi-way Cor. McKinley and Penarrubia Sts.
AGOO Bacoor, Cavite Zone 4, Bangued, Abra
Cor. Nat’l Highway & Verceles St. Tel. No.: (046) 471-2678 Tel. Nos.: (074) 752-84-41
Consolacion, Agoo, La Union Fax No.: (046) 471-1150 (082) 221-9540
Tel. No.: (072) 710-0057/ (072) 521-0052 Email add: [email protected] Fax No.: (082) 221-9540
Fax No.: (072) 710-0057 Email add: [email protected]
Email add: [email protected] ARMANDO S. PASCUAL (ACTING)
Business Manager SABAS Q. ARZADON
DANIEL B. CAMPIT, JR. Business Manager
Business Manager BAGUIO
Cor. Session Rd. & Mabini St. BASCO
ALAMINOS Baguio City 2600 NHA Bdg., Caspo Fiesta Road
Quezon Avenue, Alaminos, Pangasinan 2404 Tel. Nos.: (074) 442-3833 / 442-4244 Kaychanarianan, Basco, Batanes
Tel. Nos.: (075) 551-2196 / (075) 552-7017 Fax No.: (074) 442-2210 Tel. No.: 0917-8823696
Fax No.: (075) 552-7028 Email add: [email protected] Email add: [email protected]
Email add: [email protected]
CHRISTINE MARIE M. RILLERA BATAC
REMEDIOS C. MADRID Business Manager Cor. San Marcelino & Concepcion Sts.,
Business Manager Brgy. Valdez, Batac, Ilocos Norte
BALAGTAS Tel. No.: (077) 792-3032 / 792-3437
ANGELES G/F D&A Bldg., MacArthur Highway 617-1309
730 Sta.Rosario St., Angeles City, Pampanga San Juan, Balagtas, Bulacan Fax No.: (077) 792-3437
Tel. Nos.: (045) 888-8811 / (045) 888-6423 Tel. Nos.: (044) 693-1680 Email add: [email protected]
Fax No.: (045) 888-8800 (044) 918-1398
Email add: [email protected] Fax No.: (044) 918-1398 MARILYN S. MATA
Email add: [email protected] Business Manager
ANGELA P. MENDIOLA
Business Manager JULIO R. ESMADE BATANGAS
Business Manager P. Burgos St., Batangas City
APALIT Tel. No.: (043) 723-0226
McArthur Highway, Brgy. San Vicente BALANGA Fax No.: (043) 723-0227
Apalit, Pampanga Zulueta St., Poblacion Email add: [email protected]
Tel. No.: (045) 879-0082 Balanga, Bataan
Fax No.: (045) 302-5955 Tel. No.: (047) 237-2071 CESAR L. MENDOZA (ACTING)
Email add: [email protected] Fax No.: (047) 237-5097 Business Manager
Email add: [email protected]
ARLENE B. MORALES BAYOMBONG
Business Manager THELMA E. TUTOL J.P. Rizal St., District IV
Business Manager Bayombong, Nueva Viscaya
APARRI Tel. Nos.: (078) 321-2454 / 321-2278
J.P. Rizal St., Centro 8, Aparri, Cagayan BALAYAN Fax No.: (078) 321-2278
Tel. Nos.: (078) 822-8512 147 Plaza Mabini, Balayan, Batangas Email add: [email protected]
(078) 888-2115 Tel. Nos.: (043) 211-4332 (WBTS)
Fax No.: (078) 822-8512 407-0230 (Globe) VERONICA B. GUIBANI
Email add: [email protected] Fax No.: (043) 921-2851 Business Manager
Email add: [email protected]
JULIUS A. JIMENEZ BCEPZ
Business Manager MARICORA M. MANIÑGAT Ground Floor., PEZA Adm. Bldg.
Business Manager Loakan Road, Baguio City
ATIMONAN Tel. Nos.: (074) 447-3509 / 447-3360
Cor. Rizal and Quezon Sts. BALIUAG 246-3511
Atimonan, Quezon 15 J. Rizal St., San Jose Fax No.: (074) 447-3360
Tel. No.: (042) 316-5329 Baliuag, Bulacan Digitel 246-3511
Fax No.: (042) 511-1051 Tel. Nos.: (044) 766-2505 Email add: [email protected]
Email add: [email protected] (044) 673-1950
Fax No.: (044) 766-2454 ROSEMARIE R. RICAFORTE
MA. ISABEL V. MAKAYAN Email add: [email protected] Business Manager
Business Manager
ERIS O. FRANCISCO
Business Manager
 2007 ANNUAL REPOR T 129

BEPZ CALAMBA CENTRO ILAGAN

Bataan Economic Zone P. Burgos St., Calamba, Laguna J.P. Rizal St., Centro Ilagan
Luzon Avenue, Mariveles, Bataan Tel. Nos.: (049) 545-1864 Isabela
Tel. Nos.: (047) 935-4070 / 561-2160 Fax No.: (049) 545-2191 Tel. No.: (078) 624-2235 (Digitel)
Fax No.: (047) 935-4070 Email add: [email protected] Fax No.: (078) 622-2568 (Digitel)
Email add: [email protected] Email add: [email protected]
DULCE Q. OLOROSO
IRMA F. ALARCON (ACTING) Business Manager HENRY M. MONTALVO
Business Manager Business Manager
CALAPAN
BIÑAN J.P. Rizal St., Camilmil CEPZ
202 J. Gonzales St., Biñan, Laguna Calapan, Oriental Mindoro Gen. Trias Drive. Rosario
Tel. No.: (049) 511-62049 (Intelco) Tel. Nos.: CATSI (043) 288-4055 Cavite
Fax No.: (02) 429-3813 Fax No.: CATSI (043) 288-1621 Tel. Nos.: (046) 437-6072 / 438-1260
Email add: [email protected] Email add: [email protected] Fax No.: (046) 437-6606
Email add: [email protected]
TERESITA G. MARAJAS (ACTING) CARLITO H. BUNQUIN
Business Manager Business Manager REYNALDO M. LORICA
Business Manager
BOAC CAMILING
Gov. Damian Reyes St. Rizal St., Poblacion, Camiling, Tarlac CLARK FIELD
Murallon, Boac, Marinduque Tel No.: (045) 934-0111 G/F Bldg. 2127, Clark Dev’t Corp.
Tel. No.: (042) 332-1365 Fax No.: (045) 934-0603 C.P.Garcia St., Clark Field, Balibago
Fax No.: (042) 332-1496 Email add: [email protected] Angeles City, Pampanga
Email add: [email protected] Tel. Nos.: (045) 599-3043 / 599-2119
ROLY D. TIPAY Fax No.: (045) 599-3043
MIRLA R. VERTUCIO Business Manager Email add: [email protected]
Business Manager
CANDON ALMA D. REYES
BONTOC National Highway cor. Dario St., Business Manager
G/F, Gov’t Comm’l Bldg., Nat’l Road. San Antonio, Candon, Ilocos Sur
Poblacion, Bontoc, Mt. Province Tel. No.: (077) 742-6576 (DIGITEL) CONCEPCION
Tel. No.: (074) 462-4008 digitel Fax No.: (077) 742-6569 A. Dizon St., San Nicolas, Poblacion
Fax No.: (074) 462-4008 Digitel Email add: [email protected] Concepcion, Tarlac
Email add: [email protected] Tel. No.: (045) 923-0690
MARIE HOPE E. MALINNAG Email add: [email protected]
FRANCES C. MENDOZA Business Manager
Business Manager MAXIMO B. MENDOZA, JR. (ACTING)
CAUAYAN Business Manager
BULAN Cor. Maharlika Highway & Cabatuan Rd.
Ground Floor, Garnet Building Cauayan, Isabela DAET
Magsaysay Ave. cor. Quezon St. Tel. Nos.: (078) 652-1296 / 897-1300 Carlos II St., Daet,
Zone 4, Bulan, Sorsogon Fax No.: (078) 652-2125 Camarines Norte
Tel. Nos.: (056) 411-1295 Email add: [email protected] Tel. Nos.: (054) 440-3390 / 571-2815
411-143 (Digitel) Fax No.: (054) 721-2480
(056) 555-2231 (BTTI) CRISANTO C. DANAO Email add: [email protected]
Fax No.: (056) 555-2231 (BTTI) Business Manager
Email add: [email protected] JAIME P. OLLET
CAVITE Business Manager
MAGNO T. SALVADORA (ACTING) P. Burgos Avenue, Caridad
Business Manager Cavite City DAGUPAN
Tel. No.: (046) 431-2026 AB Fernandez Avenue, Dagupan City
CABANATUAN Fax No.: (046) 431-0136 Tel. No.: (075) 522-2662
Paco Roman St. cor. Del Pilar St. Email add: [email protected] Fax No.: (075) 522-8746
Cabanatuan City, Nueva Ecija Email add: [email protected]
Tel. Nos.: (044) 600-4832 / 463-0640 REYNALDO T. SAGUID (ACTING)
Fax No.: (044)463-2048 Business Manager IMELDA B. RULLODA
Email add: [email protected] Business Manager

RAYMUND ALBERT C. NIETES

Business Manager
130 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

DARAGA GROVE IRIGA
G/F JRE Bldg., cor. Rizal & Lotivio Sts. Ground Floor, Anest Tower Cor. Highway I & Ortega St.
Daraga, Albay Grove, Los Baños, Laguna San Roque, Iriga City
Tel. Nos.: (052) 483-3497 / (052) 824-0187 Tel. No.: (049) 536-3882 Tel. No.: (054) 299-2341
Email add: [email protected] Fax No.: (049) 536-4482 Fax No.: (054) 2992341
Email add: [email protected] Email add: [email protected]
NANCY L. VALDEZ (ACTING)
Business Manager WILFREDO C. LITAN TEODULFO A. VELASCO
Business Manager Business Manager
DAU
Mendoza Bdg., McArthur Highway GUAGUA LA TRINIDAD
Dau, Mabalacat, Pampanga Sto. Cristo, Guagua, Pampanga Km. 5., Benguet State University Compound
Tel. Nos.: (045) 892-2538 Tel. No.: (045) 900-0150 La Trinidad, Benguet
(045) 331-1026 Fax No.: (045) 900-0647 Tel. No.: (074) 422-1135 / 422-2407
Email add: [email protected] Email add: [email protected] Fax No.: (074) 422 11-35
Email add: [email protected]
FERNANDO S. NUCUM, JR. (ACTING) EVELYN E. NICDAO
Business Manager Business Manager DANIEL S. QUIÑONES
Business Manager
DINALUPIHAN GUIMBA
A.C. Commercial Bldg,, San Juan Ext. Danzalan St., cor. H. Juliano St. LA UNION
Poblacion, Dinalupihan, Bataan Guimba, Nueva Ecija Quezon Avenue
Tel. No.: (047) 431-1361 Tel. Nos.: (044) 611-2074 / 943-0048 San Fernando, La Union
Fax No.: (047) 431-3906 Fax No.: (044) 611-1309 Tel. No.: (072) 888-2768
Email add: [email protected] Email add: [email protected] Fax No.: (072) 888-2585
Email add: [email protected]
EDUARDO M. TUTOL (ACTING) JUANITO F. IGNACIO
Business Manager Business Manager MARIQUITA P. ORTEGA
Business Manager
DOLORES IBA
Pistahan Bldg. No.1, McArthur Highway 1032 R. Magsaysay Ave. LABO
Dolores, San Fernando, Pampanga cor. M. Evangelista St., Iba, Zambales G/F Labo Municipal Building
Tel. No.: (045) 860-11-45 (Digitel) Tel. No.: (047) 811-2721 Labo, Camarines Norte
Fax No.: (045) 963-50-47 Fax No.: (047) 811-1586 Tel. No.: (054) 585-20-21
Email add: [email protected] Email add: [email protected] Fax No.: (054) 585-22-73
Email add: [email protected]
RODEL S. GOPEZ EMERITO S. CATUA (ACTING)
Business Manager Business Manager PATERNO E. MANLAPAZ JR.
Business Manager
GAPAN ILAGAN
Tinio St., San Vicente Old Capitol Site, Calamagui 2nd LAGAWE
Gapan, Nueva Ecija Ilagan, Isabela JDT Bldg., Inguiling Drive
Tel. Nos.: (044) 486-1063 / 604-0087 Tel. Nos.: (078) 624-2136 / 622-2527 Poblacion West, Lagawe, Ifugao 3600
Fax No.: (044) 486-0281 Fax No.: (078) 624-2136 Tel. No.: (078) 382-2009
Email add: [email protected] Email add: [email protected] Fax No.: (078) 382-2007
Email add: [email protected]
MARIO G. MAMANGON NESTOR E. BAGUNU
Business Manager Business Manager JOVENCIO B. DIPIA-O
Business Manager
GOA IMUS
Juan Go Bldg., San Juan cor. Rizal Sts. OLMA Building, Gen. Aguinaldo LAOAG
National Highway, Goa, Camarines Sur Hi-way, Tanzang Luma, Imus, Cavite J.P. Rizal St.
Tel. Nos.: (054) 453-0227 / 453-1150 Tel. No.: (046) 970-7567 Laoag City, Ilocos Norte
Fax No.: (054) 453-1150 Fax No.: (046) 970-7567 Tel. Nos.: (077) 772-0145 / 771-4027
Email add: [email protected] Email add: [email protected] Fax No.: (077) 772-1175
Email add: [email protected]
VILMA F. AGTARAP LEONARDO M. BALITA (ACTING)
Business Manager Business Manager FELIPE M. VENTURA
Business Manager
 2007 ANNUAL REPOR T 131

LEGAZPI LUCENA MAMBURAO

Cor. Rizal & Gov. Forbes Sts. Quezon Avenue #93 National Rd., Payompon
Legaspi City Lucena City Mamburao, Occidental Mindoro
Tel. Nos.: (052) 480-7371 / 480-7898 Tel No.: (042) 710-39-72 Tel. No.: (043) 711-10-78
(052) 820-1239 Fax No.: (042) 710-33-05 Fax No.: (043) 711-10-78
Fax No.: (052)480-7780 Email add: [email protected] Email add: [email protected]
Email add: [email protected]
ELIZABETH D. DUYAN VIRGILIO A. CARANDANG
SEVERINO P. FRANCIA Business Manager Business Manager
Business Manager
MACABEBE MANGARIN
LEMERY Poblacion, Macabebe Cor. Quirino & M.H. del Pilar Sts.
Atienza St., Lemery, Batangas Pampanga San Jose, Occidental Mindoro
Tel. Nos.: (043) 411-1762 Tel. Nos.: (045) 921-1304 / 921-1346 Tel. No.: (043) 491-2052
214-2273 Fax No.: (045)921-1346 Fax No.: (043) 491-1834
Fax No.: (043) 411-1762 Email add: [email protected] Email add: [email protected]
Email add: [email protected]
VIRGINIA S. QUIWA REYNALDO L. GOROSPE
FILIPINA E. PASCUAL Business Manager Business Manager
Business Manager
MAGSAYSAY AVE. MASBATE
LIGAO Unit 103, Lynman Ogilby Centrum Quezon St., Masbate City
San Jose Street, Dunao, Ligao, Albay 358 Magsaysay Ave., Baguio City Tel. Nos.: (056) 333-2238 / 333-4507
Tel. Nos.: (052) 485-2974 Tel. Nos.: (074) 445-2248 / 300-3163 Email add: [email protected]
837-0307 Fax No.: (074) 445-2248
Fax No.: (052) 837-0307 Email add: [email protected] BYRONJOSE M. BARRAMEDA
Email add: [email protected] Business Manager
RINALAILANI S. BUYONG
SARAH JANE G. IMPERIAL Business Manager MEYCAUAYAN
Business Manager Meycauayan Sawmill Bldg.
MAHARLIKA McArthur Highway, Saluysoy
LINGAYEN Kadiwa Center Bldg., Poblacion Meycauayan, Bulacan
Cor. Avenida Rizal East & Maramba Blvd. Sta. Cruz, Marinduque Tel. Nos.: (044) 840-7389 / 228-3411
Lingayen, Pangasinan Tel. No.: (042) 321-1380 Fax No.: (044)2283411-racitelcom
Tel. Nos.: (075) 542-6020 / 662-0238 Fax No.: (042) 321-1684 Email add: [email protected]
Email add: [email protected] Email add: [email protected]
MINERVA C. DURAN
EFREN B. DUMAUAL CRISPIN M. BUENAVENTURA Business Manager
Business Manager Business Manager
MUÑOZ
LIPA MALLIG PLAINS D. Delos Santos St., Cor. Tobias St.
B. Morada Avenue, Lipa City, Batangas Cor. Don Mariano Marcos & Bernabe Sts. Science City of Muñoz, Nueva Ecija
Tel. Nos.: (043) 756-1116 / 756-1119 Roxas, Isabela Tel. Nos.: (044) 456-0142 / 456-0283
Fax No.: (043) 756-1119 Tel. Nos.: 0917-8738824 / 0927-9054187 Fax No.: (044)456-0142
Email add: [email protected] 0916-2789224 Email add: [email protected]
Fax No.: (078) 642-8008
EMMANUEL C. AMPARO Email add: [email protected] GERONIMA T. MINGALA
Business Manager Business Manager
JUANITO M. FRANCO
LOPEZ Business Manager NAGA
San Francisco St., Lopez Gen. Luna St., Naga City
Quezon MALOLOS Tel. No.: (054) 473-8243
Tel. No.: (42) 302-5919 Brgy. Sto. Niño, Malolos, Bulacan Fax No.: (054) 473-9072
Fax No.: (42) 8411180 Tel. No.: (044) 791-0494 Email add: [email protected]
Email add: [email protected] Fax No.: (044) 662-4974
Email add: [email protected] CARLITO . LACANLALE (ACTING)
JOSE RODRIGO G. CAMELLO Business Manager
Business Manager RESTITUTO R. LAQUINDANUM
Business Manager
132 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

NARVACAN PASUQUIN ROSALES
Annex Bldg., Narvacan Municipal Hall Farmers Trading Center, Poblacion I Paat Blvd., Provincial Road, Carmen West
Sta. Lucia, Narvacan, Ilocos Sur Pasuquin, Ilocos Norte Rosales, Pangasinan
Tel. Nos.: (077) 732-5760 / 732-5761 Tel. No.: (077) 775-0119 Tel No.: 075-582-7325
Fax No.: (077) 732-5760 Fax No.: (077) 775-0119 Fax No.: 075-582-7325
Email add: [email protected] Email add: [email protected] Email add: [email protected]

CHERRY G. TOQUERO MANUEL G. FORMOSO, JR. CARLITO T. TUMANAN

Business Manager Business Manager Business Manager

NORTH ZAMBALES PILI SAN FERNANDO

Barangay Hall, Poblacion South Old San Roque A. Consunji St., Sto. Rosario
Sta. Cruz , Zambales Pili, Camarines Sur San Fernando, Pampanga
Tel. No.: (047) 831-2468 Tel. No.: (054) 477-7179 Tel. No.: (045) 860-0485
Fax No.: (047) 831-1063 Tel/Fax Fax No.: (054) 477-7179 Fax No.: (045) 961-3094
Email add: [email protected] Email add: [email protected] Email add: [email protected]

JOSE E. ELAMPARO JUDY G. VILLANUEVA ALBERTO M. SESE

Business Manager Business Manager Business Manager

ODIONGAN PINAMALAYAN SAN JOSE DEL MONTE

#15 JP Laurel St., Odiongan, Romblon San Agustin Bldg A. Mabini St. Tungkong Mangga,
Tel. No.: (042) 567-5220 (otelco) Poblacion, Pinamalayan City of San Jose del Monte, Bulacan
(042) 508-3101 (romblontel) Oriental Mindoro Tel. No.: (044) 924-6177
Fax No.: (042) 567-5220 Tel. No.: (043) 284-3254 Fax No.: (044) 924-6177
Email add: [email protected] Fax No.: (043) 443-2085 Email add: [email protected]
Email add: [email protected]
JERRY R. RAQUEPO EDILBERTO R. MARCOS
Business Manager ROMULO L. GARCIA Business Manager
Business Manager
OLONGAPO SAN JOSE (Nueva Ecija)
2440 Rizal Ave., East Bajac-bajac POLANGUI Maharlika St., cor. Cardenas Street
Olongapo City, Zambales National Road, Ubaliw San Jose City, Nueva Ecija
Tel. No.: (047) 223-4989 PILTEL Polanqui, Albay Tel. No.: (044) 511-1301
Fax No.: (047) 222-2522 PILTEL Tel. No.: (052) 212-5208 Fax No.: (044) 511-1301 Digitel
Email add: [email protected] Fax No.: (052) 486-2114 Email add: [email protected]
Email add: [email protected]
CRISTINA C. VITUG TERESITA E. ALFONSO
Business Manager ARLIN P. ENGUERO (ACTING) Business Manager
Business Manager
ORANI SAN PABLO
Yñeco Bldg., McArthur Highway PUERTO PRINCESA Marcos Paulino St.
Orani, Bataan Cor. Valencia St. & Rizal Ave. San Pablo City, Laguna
Tel. No.: (047) 431-3445 Puerto Princesa, Palawan Tel. Nos.: (049) 562-4522 /
Fax No.: (047) 431-1378 Tel. No.: (048) 434-3742 562-1973
Email add: [email protected] Fax No.: (048) 433-2421 Fax No.: (049) 5620608
Email add: [email protected] Email add: [email protected]
VICTORIA I. JORGE (ACTING)
Business Manager JACKELYN C. SANCHEZ EMMELINE O. BARROSO
Business Manager Business Manager
PANIQUI
M.H. del Pilar St., Brgy. Estacion, ROMBLON SAN PEDRO
Paniqui , Tarlac Bagong Lipunan St., Km. 30 National Highway
Tel. Nos.: (045) 931-0656 / 0383 Brgy. Romblon, Romblon Brgy. Nueva, San Pedro, Laguna
Fax No.: (045) 931-0656 Tel. No.: (054) 472-8218 Tel. No.: (02) 808-5387
Email add: [email protected] Fax No.: (054) 472-8218 Fax No.: (02) 847-8829
Email add: [email protected] Email add: [email protected]
ROSE NELLIE G. MAGBAG
Business Manager ROBERTO R. MADERA MAJORA S. CAISIDO
Business Manager Business Manager
 2007 ANNUAL REPOR T 133

SAN VICENTE SOLANO SUBIC BAY

M. Crisostomo St., San Vicente, Malolos City Benigno Aquino Avenue Lot 5, Retail 2, Times Square Mall,
Tel. No.: (044) 791-0598 Poblacion South Sta. Rita Road, Subic Bay Freeport Zone
Fax No.: (044) 791-0598 Solano, Nueva Vizcaya Olongapo City , Zambales
Email add: [email protected] Tel. No.: (078) 326-5363 Tel. Nos.: (047) 252-7962 / 63
Fax No.: (078) 326-5282 Fax No.: (047) 252-7964
EDWIN L. PADIERNOS Email add: [email protected] Email add: [email protected]
Business Manager
QUIRINO M. GUMAYAGAY, JR. (ACTING) LUZ S. MUSNI
SANCHEZ MIRA Business Manager Business Manager
Alfonzo Du Building
Maharlika Highway corner Jouglas Streets SORSOGON TABACO
Centro 1, Sanchez Mira Rizal St., Sorsogon City Ziga Ave., Tabaco, Albay
Tel. No.: (078) 822-9221 / 864-7518 Tel. No.: (056) 211-1649 Tel. Nos.: (052) 830-0125 / 487-5053
Fax No.: (078) 864-7518 (056) 421-5207 Fax No.: (052) 487-5053
Email add: [email protected] Email add: [email protected] Email add: [email protected]

JUANITA C. DELOS SANTOS TOMAS D. SEMENTELA VICENTE U. BERMEJO

Business Manager Business Manager Business Manager

SANGITAN STA. CRUZ TABUK

Brgy. Dicarma, Maharlika Highway P. Guevarra Ave. Lua Bldg., Mayangao St., Poblacion
Cabanatuan City , Nueva Ecija Sta. Cruz, Laguna Tabuk, Kalinga
Tel. No.: (044) 463-8095 Tel. No.: (049) 808-1365 / 1945 Tel. No.: 9196-721722
Fax No.: (044) 463-8095 Fax No.: (049) 808-1945 Email add: [email protected]
Email add: [email protected] Email add: [email protected]
BENEDICTO B. VASQUEZ
AMELITA T. PESTAÑO MARIO A. CORTEZANO Business Manager
Business Manager Business Manager
TAGAYTAY
SANTIAGO STA. MARIA Vistamart Bldg., Mendez, Cavite
Maharlika Highway cor. Camacam St. 104 Gen. Luna St. Tel. No.: (046) 413-0384 / 413-2499
Centro East, Santiago City Poblacion, Sta. Maria 3022 Bulacan Fax No.: (046) 413-0384
Tel. No.: (078) 628-8196 Tel. No.: (044) 927-6173 Email add: [email protected]
Fax No.: (078) 682-8364 Fax No.: (044) 641-1555
Email add: [email protected] Email add: [email protected] EDOVINIA B. ESPINO
Business Manager
VILLAMOR L. MANGAOANG KAREN S. MENDOZA
Business Manager Business Manager TARLAC
F. Tanedo St., cor. Panganiban St.
SILANG STA. ROSA San Nicolas, Tarlac City , Tarlac
166 J. P Rizal St., Silang, Cavite Old National Highway, Brgy. Balibago Tel. No.: (045) 982-1212
Tel. No.: (046) 414-0661 Sta. Rosa City, Laguna Email add: [email protected]
Fax No.: (046) 414-0660 Tel. No.: (049) 837-2953
Email add: [email protected] Fax No.: (049) 534-2893 EMMANUEL G. JAVIER
Email add: [email protected] Business Manager
JAY B. PESIGAN
Business Manager ELIZABETH J. SANTOS TAYUG
Business Manager Zaragosa St., Tayug, Pangasinan
SINILOAN Tel. No.: (075) 572-4133 / 572-4428
G. Redor Street, Siniloan, Laguna STO. TOMAS Fax No.: (075) 572-4133
Tel. Nos.: (049) 813-0019 / 341-1282 Km.7, McArthur Highway Email add: [email protected]
Fax No.: (049) 813-0019 San Matias, Sto. Tomas,, Pampanga
Email add: [email protected] Tel. No.: (045) 961-2785 ISIDRO C. TANDOC
Fax No.: (045) 860-2735 Business Manager
FLORENCIO C. BANTA Email add: [email protected]
Business Manager
MICHAEL I. ORTIZ
Business Manager
134 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

TUAO VISAYAS BRANCHES BAYAWAN
G/F Municipal Bldg., Centro 2, National Highway cor. Mabini St.
Tuao, Cagayan AMELIA AVENUE Brgy. Suba, Bayawan, Negros Oriental
Tel. No.: (078) 826-2025 Cor. Amelia & Margarita Sts. Tel. No.: (035) 531-0283
Fax No.: (078) 826-2025 Libertad, Bacolod City Fax No: (035) 228-3027
Email add: [email protected] Negros Occidental Email add: [email protected]
Tel. No.: 433-0931
ELIZABETH Y. MANAUIS Fax No.: 435-3280 ENRIQUE E. TIA
(In Concurrent Capacity) Email add: [email protected] Business Manager
Business Manager
MARILOU L. INFANTE BINALBAGAN
TUGUEGARAO Business Manager Don Pedro R. Yulo St., Binalbagan
Bonifacio St., Tuguegarao, Cagayan Negros Occidental
Tel. Nos.: (078) 844-1832 / 846-4203 ANTIQUE Tel. Nos.: (034) 388-8241 / 388-8279
Fax No.: (078) 846-1968 T. Fornier Street, Bantayan, San Jose Fax No: (034) 388-8216
Email add: [email protected] Antique Email add: [email protected]
Tel. Nos.: (036) 540-8469 / 540-9587
ELIZABETH Y. MANAUIS Fax No: (036) 540-9588 ARMANDO E. FAMOSO
Business Manager Email add: [email protected] Business Manager

UPLB WILFRED E. BRAVO BOGO

Lanzones St., U.P. Los Baños College Business Manager Cor. San Vicente and R. Fernan Sts.
Laguna Poblacion Bogo, Cebu
Tel. Nos.: (049) 536-2880 / 536-2733 BACOLOD Tel. No.: (032) 251-2124
Fax No.: (049) 536-2733 Lacson Street, Bacolod City Fax No: (032) 251-2124
Email add: [email protected] Negros Occidental Email add: [email protected]
Tel. No.: (034) 434-8007 / 432-0610
EDNA G. MANGALINDAN Fax No: (034) 433-9462 NENA D. KISEO (ACTING)
Business Manager Email add: [email protected] Business Manager

URDANETA MA. ARLENE V. DAVID (ACTING) BORONGAN

McArthur Hi-way, Nancayasan Business Manager Real St., Songco, Borongan, Eastern Samar
Urdaneta City Tel. Nos.: (055) 560-9041
Tel. Nos.: (075) 624-2613 BAIS Fax No: (055) 560-9041
(075) 568-2451 Rosa Dy Teves Bldg., Quezon St. Email add: [email protected]
Fax No.: (075) 624-2613 National Highway, Bais City, Negros Oriental
Email add: [email protected] Tel No: (035) 402-9343 JESUS P. YLANAN
Fax No: (035) 541-5355 Business Manager
PRESY L. BAÑEZ Email add: [email protected]
Business Manager CADIZ
SILVANO V. RUBIO (ACTING) cor. Luna & Cabahug Streets, Cadiz City
VIGAN Business Manager Negros Occidental
Florentino St., Vigan, Ilocos Sur Tel. No.: (034) 493-1217
Tel No.: (077) 722-2517 BANILAD Fax No: (034) 493-1217
Fax No.: (077) 722-2516 C. Foodland Bldg., Gov. M. Cuenco Avenue Email add: [email protected]
Email add: [email protected] Cor. Paseo Saturnino, Banilad,
Cebu City, Cebu JENNIFER H. LEE (ACTING)
ARTEMIO C. BUTED Tel. Nos.: (032) 345-5200 / 416-0988 Business Manager
Business Manager Fax No: (032) 346-7305
Email add: [email protected] CALBAYOG
VIRAC 727 National Highway, Brgy. Obrego
055 Quezon Ave., San Jose QUINBIEN LEE B. ORGINO (ACTING) Calbayog City, Western Samar
Virac, Catanduanes Business Manager Tel. Nos.: (055) 209-1305 / 533-9011
Tel. No.: (052) 811-1297 Fax No: (055) 533-9011
Fax No.: (052) 811-1176 BAYBAY Email add: [email protected]
Email add: [email protected] Baybay Multipurpose Gym.
Magsaysay Avenue, Baybay, Leyte TEODY B. BERGADO
MANUEL M. ROMERO Tel. Nos.: (053) 335-2455 / 563-9936 Business Manager
Business Manager Fax No: (053) 335-2455
Email add: [email protected]

GABRIEL D. KIRONG
Business Manager
 2007 ANNUAL REPOR T 135

CATARMAN DUMAGUETE KABANKALAN

Cor. Jacinto & Garcia Sts., Brgy. Narra Silliman Avenue cor. Real St. Dumaguete City G/F New Guihulngan Public Market
Catarman, Northern Samar Negros Oriental S. Villegas Street, Guihulngan
Tel. Nos.: (055) 500-9003 / 251-8453 Tel. Nos.: (035) 422-9176 / 422-9658 Negros Oriental
Fax No: (055) 500-9003 Fax No: (035) 225-4740 Tel. No.: (034) 471-2193
Email add: [email protected] Email add: [email protected] (033) 471-2491
Fax No: (034) 471-3425
JOVENAL S. MANGAPIS CUPIDO D. CADIMAS Email add: [email protected]
Business Manager Business Manager
MARIE TESS B. MANGENTE
CATBALOGAN FUENTE OSMEÑA Business Manager
Capitol Park (Imelda Park Site) B. & F Paray Building, Osmeña Blvd.,
Catbalogan, Western Samar Cebu City KALIBO
Tel. Nos.: (055) 251-2034 / 543-8399 Tel. Nos.: (032) 253-5887 / 253-4467 Pastrana Street, Poblacion
Fax No: (055) 251-2034 Fax No: (032) 255-4569 Kalibo, Aklan
Email add: [email protected] Email add: [email protected] Tel. No.: (036) 262-4811
(036) 268-5262
ELIAS S. MACARIOLA CECILE L. SALVAÑA Fax No: (036) 262-1769
Business Manager Business Manager Email add: [email protected]

CEBU GUIHULNGAN MELANIE B. SALAZAR

Cor. Jakosalem & M.C. Briones Sts. G/F New Guihulngan Public Market, Business Manager
Cebu City S. Villegas Street, Guihulngan
Tel. Nos.: (032) 255-1706 / 255-1699 Negros Oriental LA CARLOTA
Fax No: (032) 253-7676 Tel. No.: (035) 336-1038 Cor. La Paz & Rizal Streets
Email add: [email protected] Fax No: (035) 231-3060 La Carlota City, Negros Occidental
Email add: [email protected] Tel. No.: (034) 460-3330
JOSE RAUL P. CATAGUIS Fax No: (034) 460-2585
Business Manager JOSE T. PANUNCILLON Email add: [email protected]
Business Manager
CENTRO MANDAUE JUDY B. ALISAJE (ACTING)
A & L Suico Building, A. del Rosario St., GUIUAN Business Manager
Mandaue City, Cebu Cor. San Nicolas Street
Tel. Nos.: (032) 346-7612 and Guimbaolibot St. LAHUG
Fax No: (032) 346-7613 Guiuan, Eastern Samar FSC Building, Gorordo Avenue, Lahug
Email add: [email protected] Tel. No.: (055) 271-2165 Cebu City, Cebu
Fax No: (055) 582-0288 Tel. No.: (032) 232-2786
FRANCIS R. ROBLES Email add: [email protected] Fax No: (032) 233-8899
Business Manager Email add: [email protected]
EPITACIO C. TAGACTAC
DE LEON Business Manager CESAR A. NOVAL
Cor. Jalandoni & Ledesma Sts., Iloilo City Business Manager
Tel. Nos.: (033) 338-1189 / 337-4978 ILOILO
Email add: [email protected] Cor. Gen. Luna & Valeria Streets LA PAZ
Iloilo City, Iloilo Inayan Bldg., Cor. Huevana & Rizal Sts.
CHRISTINE A. MARTINEZ Tel. No.: (033) 337-2476 La Paz, Iloilo City, Iloilo
Business Manager Fax No: (033) 335-0473 Tel. Nos.: (033) 320-1505
Email add: [email protected] (033) 320-2256
DOWNTOWN TACLOBAN Fax No: (033) 320-1506
G/F Washington Trading Bldg., Rizal Avenue JAYBERT JOSE A. ONG Email add: [email protected]
Tacloban City, Leyte Business Manager
Tel. No.: (053) 523-7895 JAY VICTOR E. MABILOG
Fax No: (053) 325-8123 JARO Business Manager
Email add: [email protected] #8 L. Jaena Street, Jaro
Iloilo City, Iloilo LAPU-LAPU
DEMETRIO C. ARBAS Tel. No.: (033) 320-1100 Manuel L. Quezon Highway
Business Manager (033) 329-0750 Pajo, Lapu-Lapu City, Cebu
Fax No: (033) 320-6984 Tel. No.: (032) 340-8347
Email add: [email protected] Fax No: (032) 340-1250
Email add: [email protected]
MA. EVELYN M. JIMENA
Business Manager JESUS M. GABATAN
Business Manager
136 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

LUZURIAGA M.J. CUENCO ROXAS
Cor. Luzuriaga & Araneta Sts., G/F Harbor View Hotel, M.J. Cuenco Avenue Magallanes St., Roxas City, Capiz
Bacolod City, Negros Occidental Cebu City, Cebu Tel. No.: (036) 621-0415
Tel. No.: (034) 435-0316 Tel. No.: (032) 232-9912 Fax No: (036) 621-2484
Fax No: (034) 433-2476 Fax No: (032) 232-9912 Email add: [email protected]
Email add: [email protected] Email add: [email protected]
ESTHER S. ARCEÑO
ANECITO D. PARTOSA TRANQUILINO R. JIMENEZ Business Manager
Business Manager Business Manager
SAN CARLOS
MAASIN NAVAL V. Gustilo Street, San Carlos City
Cor. San Juan & Allen Streets Cor. Caneja & Ballesteros Sts., Naval Negros Occidental
Tunga-tunga, Maasin, Biliran Province Tel. No.: (034) 729-8000
Southern Leyte Tel. No.: (053) 500-9024 Fax No: (034) 312-5248
Tel. No.: (053) 381-2113 Fax No: (053) 500-9025 Email add: [email protected]
Fax No: (053) 570-9625 Email add: [email protected]
Email add: [email protected] SISINIO A. DINEROS
RENATO R. ARRADAZA (ACTING) Business Manager
GUMERSINDO S. PAZ Business Manager
Business Manager SILAY
ORMOC Rizal Street, Silay City
MACTAN EXPORT PROCESSING ZONE Cor. Bonifacio & Catag Sts., Ormoc City Negros Occidental
(MEPZ) Tel. Nos.: (053) 561-2526 / (053) 255-4305 Tel. No.: (034) 495-2050
1st Ave., MEPZ, Mactan Island Fax No: (053) 561-9757 Fax No: (034) 495-2051
Lapu-Lapu City, Cebu Email add: [email protected] Email add: [email protected]
Tel. No.: (032) 340-0072
Fax No: (032) 340-0560 JOANIS F. ALFAFARA AMELIA A. YUSAY
Email add: [email protected] Business Manager Business Manager

PEARCY JOY T. SALVADOR PALOMPON TABUNOK

Business Manager G/F Palompon Municipal Bldg. National Highway, Tabunok
Rizal St., Poblacion, Palompon, Leyte Talisay City, Cebu
MACTAN INT’L AIRPORT Tel. No.: (053) 338-2104 Tel. Nos.: (032) 272-6435
EXT. OFFICE (MIAEO) Email add: [email protected] (032) 272-6434
Waterfront Mactan Casino Hotel Fax No: (032) 272-6435
#1 Airport Rd., Lapu-Lapu City ZACARIAS A. CAPENDIT Email add: [email protected]
Tel. No.: (032) 340-0029 Business Manager
Fax No: (032) 340-0560 MATEO L. COMPAHINAY, JR.
PASSI Business Manager
PEARCY JOY T. SALVADOR Cor. F. Palmares & San Juan Sts.
Business Manager Passi City, Iloilo TACLOBAN
Tel. Nos.: (033) 311-5466 Cor. Sto. Niño & Justice Romualdez Sts.
MANDAUE BRANCH (033) 311-5044 Tacloban City, Leyte
J.D. Bldg. Lopez Jaena St., Tipolo Fax No: (033) 311-5044 Tel. No.: (053) 523-3611
Cor. Nat’l H-way & A. del Rosario St. Email add: [email protected] (053) 325-5180
Mandaue City, Cebu Fax No: (053) 325-5180
Tel. No.: (032) 422-6455 MARJORIE C. MANGILIN Email add: [email protected]
Fax No: (032) 346-2827 Business Manager
Email add: [email protected] MARIA FE F. BOCO
PLAZA LIBERTAD Business Manager
DERWIN J. DUMADAG J. M. Basa Street, Iloilo City, Iloilo
Business Manager Tel. No.: (033) 338-0819 TAGBILARAN
Fax No: (033) 338-0818 Cor. C.P. Garcia Ave. & J.A. Clarin St.
MIAG-AO Email add: [email protected] Poblacion, Tagbilaran City, Bohol
G/F One TGN Bldg. Cor. Noble & Sto. Tomas Tel. No.: (038) 411-4196
Sts., Miag-ao, Iloilo JACINTO F. MARFIL Fax No: (038) 411-3541
Tel. No.: (033) 315-8201 Business Manager Email add: [email protected]
Fax No: (033) 315-8201
Email add: [email protected] FLORENCIO H. RUEDAS
Business Manager
ARLENE T. NOVILLA
Business Manager
 2007 ANNUAL REPOR T 137

TOLEDO BAJADA CAGAYAN DE ORO

Rafols Street, Poblacion Ground Floor, Quibod Building Corrales Ave., Corner Toribio Chavez St.
Toledo City, Cebu J.P. Laurel St. Cor. A. Loyola Cagayan de Oro City
Tel. No.: (032) 322-5613 Davao City, Davao del Sur Tel. Nos.: (088) 857-5684 / 857-6061
Fax No: (032) 467- 8194 Tel. No.: (082) 224-2474 Fax No: (08822) 726010
Email add: [email protected] (082) 224-2479 Email add: [email protected]
Fax No : (082) 222-7273
MANUEL C. OLIS Email add: [email protected] MITZI T. CAGURANGAN
Business Manager Business Manager
LEONILA F. COQUILLA
TUBIGON Business Manager CARMEN
Cor. Cabangbang Ave. & Jesus Vaño St. Premier Building, Elipe Park
Poblacion, Tubigon, Bohol BANGOY Rodolfo M. Pelaez St., Corner Agoho Drive
Tel. Nos.: (038) 508-8027 / 508-8228 Ground Floor,, Amigleo Bldg. Brgy. Carmen, Cagayan de Oro City
Fax No: (038) 508-8228 Cor. Bonifacio & C. Bangoy Sts. Tel. Nos.: (08822) 727870 / (088) 858-4203
Email add: [email protected] Davao City, Davao del Sur Fax No: (088) 858-4203
Tel. No.: (082) 221-9538 to 40 Email add: [email protected]
CHITO A. BATON Fax No: (082) 221-9540
Business Manager Email add: [email protected] LINA ESTRELLA G. FABURADA
Business Manager
UPTOWN CEBU GILDA C. CASIANO
#36 Jethouse Building, Jones Ave. Business Manager CLIMACO
Cebu City, Cebu J&B Bldg. Buenavista St., Zamboanga City
Tel. No.: (032) 253-1663 BANKEROHAN Tel. Nos.: (062) 993-1033 / 991-1643
Fax No: (032) 255-6161 Units 101-102, JLF Parkway Bldg. Fax No: (062) 993-1033
Email add: [email protected] Cor. Magallanes & E. Quirino Sts. Email add: [email protected]
Davao City
MARILOU A. PLARIZAN (ACTING) Tel. No.: (082) 221-8047 GINE ROSARIO S. TABIQUE
Business Manager Fax No: (082) 221-8047 Business Manager
Email add: [email protected]
VICTORIAS COGON
Cor. Ascalon & Montinola Sts. MA. JEANNETTE F. APOLINAR Jose Vicente Bldg. Mortola, JR Borja Sts.,
Victorias City, Negros Occidental Business Manager Cagayan de Oro City
Tel. No.: (034) 399-2716 Tel. No.: (088) 857-4149
Fax No: (034) 399-2947 BASILAN Fax No: 08822 723471
Email add: [email protected] Strong Blvd., Isabela City, Basilan Province Email add: [email protected]
Tel. No.: (062) 200-3351
NOLI V. LEGASPI Email add: [email protected] GEORGE G. CUEVAS
Business Manager Business Manager
NAPOLEON P. YU
Business Manager COTABATO
No. 39 Makakua Street, Cotabato City
MINDANAO BRANCHES BISLIG Tel. Nos.: (064) 421-5272 / 421-8756
Abarca & Espiritu Streets, Mangagoy Fax No: (064) 421-2696
AGDAO Bislig City, Surigao del Sur Email add: [email protected]
LA Bldg., DRS. 5 & 6 Lapu-Lapu St. Tel. No.: (086) 853-4149
Davao City Fax No: (086) 628-2333 EBRAHIM G. TAKI
Tel. Nos.: (082) 221-7912 / 221-7919 Email add: [email protected] Business Manager
Fax No: (082) 221-7918
Email add: [email protected] RODEN B. BUNA DAVAO
Business Manager Claro M. Recto Street, Davao City
MA. SHEILA B. ANINO Tel. No.: (082) 227-2971
Business Manager BUTUAN Fax No: (082) 226-2541
Montilla Boulevard, Brgy. Dagohoy Email add: [email protected]
AGUSAN DEL SUR Butuan City, Agusan del Norte
Roxas St., Brgy. 4, San Francisco Tel. Nos.: (085) 342-5800 / 225-4490 FELIMON A. MACABINGKIL
Agusan del Sur Fax No: (085) 342-5800 Business Manager
Tel. No.: (085) 242-3007 Email add: [email protected]
Fax No: (085) 839-0156
Email add: [email protected] REGOR G. ARREZA
Business Manager
VICENTE S. CLAROS, JR.
Business Manager
138 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

DADIANGAS IPIL MALAYBALAY
RD Bldg., Santiago Blvd. Ground Floor, Chu Bldg., Highway Junction Flores Bldg. Cor. Rizal & Tabios Sts.
General Santos City Poblacion Ipil, Sibugay Province, Zamboanga Poblacion, Malaybalay City, Bukidnon
Tel. No.: (083) 302-5281 Tel. No.: (062) 333-2395 Tel. No.: (088) 813-2459
Fax No: (083) 553-5283 Fax No: (062) 333-2395 Fax No: (088) 813-2460
Email add: [email protected] Email add: [email protected] Email add: [email protected]

MARIA JESSICA N. REYES SANCHO N. CARDENAS, JR. FLORENCIO T. BALBA

Business Manager Business Manager Business Manager

DIGOS ISULAN MAMBAJAO

Quezon Ave., Digos City, Davao del Sur Aristoza Bldg., Dansuli, Isulan Gen. B. Aranas corner Jose Burgos St.
Tel. No.: (082) 553-2543 Sultan Kudarat Mambajao, Camiquin
Fax No: (082) 553-2187 Tel. No.: (064) 201-3427 Tel. No.: (088) 387-1081
Email add: [email protected] Fax No: (064) 201-3428 Fax No: (088) 387-1080
Email add: [email protected] Email add: [email protected]
VISITACION L. PEÑALOSA
Business Manager JOSIE B. MILLEVO MARVIN G. MAGTO
Business Manager Business Manager
DIPOLOG
Corner General Luna & Carlos P. Garcia Sts. JOLO MARAWI
Dipolog City, Zamboanga del Norte Serantes St., Jolo, Sulu Perez Street, Pob., Marawi City
Tel. No.: (065) 212-3581 Tel. No.: (085) 341-8911 Loc 2591 Lanao del Sur
Fax No: (065) 212-2557 Fax No: (085) 341-8911 Tel. No.: (063) 352-0571 (ITALTEL)
Email add: [email protected] Email add: [email protected] Fax No: (063) 352-0257
Email add: [email protected]
ROEHL L. BUGASH GIOKSING M. DAMMANG
Business Manager Business Manager SANDORIE T. DISOMANGCOP
Business Manager
GENERAL SANTOS KIDAPAWAN
City Hall Drive, Osmena St. Quezon Blvd., Kidapawan City MARBEL
Gen. Santos City, South Cotabato North Cotabato Casa Gemma Bldg., Gen Santos Drive cor.
Tel. No.: (083) 552-2858 / 552-3261 Tel. Nos.: (064) 288-1695 / 288-1696 Aquino St., Koronadal City
Fax No: (083) 552-3254 Fax No: (064) 288-5118 South Cotabato
Email add: [email protected] Email add: [email protected] Tel. No.: (083) 228-6180
Fax No: (083) 228-2706
ELSIE P. ROMANO CIRILO G. CAMEROS Email add: [email protected]
Business Manager Business Manager
MELLY P. DELA VICTORIA
GINGOOG KORONADAL Business Manager
National Highway, Gingoog City Morrow St. City of Koronadal
Misamis Oriental South Cotabato MATI
Tel. No.: (088) 861-0210 Tel. Nos.: (083) 228-6059 (Marbel Telephone) Rizal Extension Brgy., Central Mati
Fax No: (088) 861-0127 Fax No: (083) 228-3727 (Marbel Telephone) Davao Oriental
Email add: [email protected] Email add: [email protected] Tel. No.: (087) 388-3799
Fax No: (087) 388-3799
ARDON L. RASONABE ETHYLIA O. LACANARIA Email add: [email protected]
Business Manager Business Manager
JOSEPHINE P. LOPEZ
ILIGAN LIMKETKAI CENTER Business Manager
Cor. Gen. Aguinaldo & Labao Sts. CM Recto Ave., Lapasan District
Iligan City, Lanao del Norte Cagayan de Oro City MATINA
Tel. Nos.: (063) 221-2802 / 221-2804 Tel. No.: MISORTEL - 08842-722872 BF Bldg., McArthur Hi-way Cor. Aries St.
Fax No: (063) 223-8182 Fax No: (088) 856-3696 Matina Crossing, Davao City
Email add: [email protected] Email add: [email protected] Tel. No.: (082) 299-2850
Fax No: (082) 299-2850
JACINTO L. JACINTO LUZMIN B. CABEGUIN Email add: [email protected]
Business Manager Business Manager
FRANCISCO T. LEGASPI
Business Manager
 2007 ANNUAL REPOR T 139

MIDSAYAP PALA-O TANDAG

Quezon Avenue, Poblacion 6 B.S. Ong Street, Pala-o. Iligan City Cor. Donasco & Quezon Sts.,
North Cotabato Lanao del Norte Tandag, Surigao del Sur
Tel. No.: (064) 229-8004 Tel. No.: (063) 221-3892 Tel. No.: (086) 211-3695
Fax No: (064) 229-8004 Fax No: (063) 221-3206 Fax No : (086) 211-2558
Email add: [email protected] Email add: [email protected] Email add: [email protected]

RENATO L. TONIO RICARTE T. CADALIN MANOLITO U. TAYAO

Business Manager Business Manager Business Manager

MONTEVERDE SASA TAWI-TAWI

G/F Mintrade Bldg., Monteverde Pavino Bldg., Km. 9, National Highway Bagay St., Bongao, Tawi Tawi
Corner Gov. Sales St., Davao City Sasa, Davao City, Davao del Sur Tel. No.: BNTSI (068) 268-1033
Tel. Nos.: (082) 225-5895 / 222-0514 Tel. No.: (082) 233-0585 Fax No: (068) 268-1200
Fax No: (082) 222-0515 Fax No: (082) 233-0584 Email add: [email protected]
Email add: [email protected] Email add: [email protected]
ROSALYN I. TANGKUSAN
MIRIAM R. BALOYO RODESCENDO B. SARANILLO Business Manager
Business Manager Business Manager
TETUAN
MSU MARAWI EXTENSION OFFICE SINDANGAN Adriano Bldg., Veterans Avenue
(Marawi Branch) Cor. Rizal & Bonifacio St., Poblacion Zamboanga City
Mindanao State University Compound Sindangan Zamboanga del Norte Tel. No.: (062) 993-2234
Marawi City, Lanao del Sur Tel. Nos.: (065) 224-2018 / 224-2017 Fax No: (062) 993-0353
Email add: [email protected] Fax No: (065) 224-2018 Email add: [email protected]
Email add: [email protected]
SANDORIE T. DISOMANGCOP EDNAIDA J. ABDURRAHMAN
Business Manager RICHARD R. MANINGO Business Manager
Business Manager
OROQUIETA TORIL BRANCH
Senator Jose Ozamis St., Lower Lamac STA. ANA DAVAO Anecita G. Uy Building, Saavedra Street
Oroquieta City, Misamis Occidental Corner F. Bangoy & Rosemary Sts. Toril, Davao City
Tel. No.: (088) 531-1052 Davao City Tel. Nos.: (082) 291-0028 / 291-0030
Fax No: (088) 531-1053 Tel. Nos.: (082) 226-3145 / 221-1852 Fax No: (082) 291-0028
Email add: [email protected] Fax No: (082) 221-1851 Email add: [email protected]
Email add: [email protected]
JOSE M. LIQUIDO HENRIZA M. BAUTISTA
Business Manager MA. LUISA CARMEN A. PRIETO Business Manager
Business Manager
OZAMIZ VALENCIA
Rizal Avenue, Brgy. Aguada, Ozamiz City SURIGAO Tamay Lang Bldg., G. Lavina St.
Misamis Occidental 00045 Rizal St., Surigao City Pob. Valencia City. Bukidnon
Tel. No.: (088) 521-0010 Tel. No.: (086) 231-7104 Tel. No.: (088) 222-2148
Email add: [email protected] (086) 826-4335 Fax No: (088) 282-2918
Fax No : (086) 231-7822 Email add: [email protected]
EDUARDO M. CATAPANG Email add: [email protected]
Business Manager DAISY ISABEL B. CALLAO
RICARDO A. GONZAGA Business Manager
PAGADIAN Business Manager
Rizal Avenue, Balangasan District YLLANA BAY EXTENSION OFFICE
Pagadian City, Zamboanga del Sur TAGUM (Pagadian Branch)
Tel. No.: (062) 215-1162 Rizal St., Magugpo Poblacion, Tagum City Casa de Pielago Building. Cor. Rizal Avenue
Fax No: (062) 214-1309 Davao del Norte And Bonifacio St., Pagadian City
Email add: [email protected] Tel. No.: (082) 217-3474 Zamboanga del Sur
Fax No: (082) 400-2493 Tel. No.: (062) 215-2760
HENRY Q. SUGUE Email add: [email protected] Fax No: (062) 214-1309
Business Manager Email add: [email protected]
ABEL JAMES I. MONTEAGUDO
Business Manager HENRY Q. SUGUE
Business Manager
140 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

ZAMBOANGA COMMERCIAL LENDING CENTERS SOUTHERN LUZON A
J.S. Alano St., corner P. Lorenzo St. PNB Batangas Branch
Zamboanga City METRO MANILA Tel. Nos.: (043) 723-0225 / 1409
Tel. No.: (062) 991-5031 Telefax No.: (043) 723-1409
Fax No: (062) 991-2671 CALOOCAN
Email add: [email protected] PNB Monumento Branch JOHN PAUL D. ESGUERRA
Tel No.: 366-9416 Head
EVELINA A. BALBON
Business Manager ANGELINE GRACE T. GO CAGAYAN VALLEY
Head PNB Cauayan Branch
Tel. Nos.: (078) 652-1408
CUBAO (078) 897-1458
REGIONAL AND AREA HEADS PNB Cubao Branch
Tel. Nos.: 912-1941 / 1944 / 1947 JUAN C. LUGO, JR.
METRO MANILA Head
NARCISO S. CAPITO, JR. EDUARDO L. SANTOS
Regional Head Head ILOCOS
PNB Dagupan Branch
Metro 1 PERLA P. JOCSON MAKATI Tel. Nos.: (075) 522-0898
Metro 2 NILO U. EGOT (ACTING) PNB Ayala Branch (075) 515-2269
Metro 3 ESMERALDA M. ABELLA (ACTING) Tel. Nos.: 894-1422 / 1428 / 1430 Telefax No.: (075) 522-0898
Metro 4 ROSARIO A. RODIL 864-0594
Metro 5 CRESCENCIO M. ABARA GEORGE A. FORTEA
Metro 6 NESTOR O. PINEDA DANTE J. SALVADOR Head
Metro 7 WARNY R. HERNANDEZ Head
Metro 8 CARINA L. SALONGA BICOL
Metro 9 ESTRELLA V. CEBALLO MANILA PNB Naga Branch
Metro 10 ELYNOR P. IMPERIO 7th Floor, PNB Financial Center Tel. Nos.: (054) 811-2616
Area Heads Tel. Nos.: 526-3280 / 573-4383 Telefax No.:(054) 473-0393
573-4384 / 551-2859
573-4413 NILO R. PADUA
LUZON Trunkline 891-6040 Head
RAFAEL B. DE PERALTA, JR Loc. 2628 / 29 / 2038 / 39
Regional Head SOUTHERN LUZON B
ERIC P. YLAGAN PNB Sta. Rosa Branch
Nol 1 REYNALDO A. INTAL Head Tel. Nos.: (049) 534-2894
Nol 2 CORCINO G. ESTACIO, JR. (049) 837-2954
Nol 3 NICOLAS S. DIAZ ORTIGAS Telefax No.: (049) 534-2892
Nol 4 ROGER P. COLOBONG PNB Ortigas Branch
Nol 5 ADRANAIDA V. ALFARO Tel. Nos.: 634-2571 to 75 ARISTON E. FLORES
Nol 6 ESTRELLA A. ANDAL Head
FELIZARDO M. MANGUBAT
Sol 1 WARNY R. HERNANDEZ Head VISAYAS
Sol 2 JESSICA J. LASET PNB Cebu Branch
Sol 3 VICENTE A. LONGNO LUZON Tel. Nos.: (032) 256-3365
Sol 4 ALVIN A. LISTA 7th Floor, PNB Financial Center (032) 253-7636
Area Heads Tel. No.: 526-3208 Telefax No.: (032) 255-5787
Trunkline: 891-6040
VISAYAS / MINDANAO Loc. 4549 / 4709 NOVEL G. FORTICH
RAFAEL A. RUIZ Head
Regional Head ROY D. ARPON
Head NEGROS
Cebu/Bohol JOSEFINA ROSARIO C. DINSAY PNB Bacolod Branch
Samar/Leyte CESAR A. BALA CENTRAL LUZON Tel. Nos.: (034) 433-3449
Negros EDWIN J. ARROYO PNB Angeles Branch (034) 433-2730
Panay DIOSDADO J. GALANTO Tel. Nos.: (045) 625-9771 Telefax No.:(034) 433-4092
(045) 888-9664
NMin EXPEDITO B. ZAMBAS Telefax No.: (045) 625-9771 FE C. JUPLO
SMin DOLORES T. MARTINEZ Head
WMin TERESITA U. SEBASTIAN CRISANTO A. COCAL
SWMin ANDRADE F. LAGOS Head
Area Heads
 2007 ANNUAL REPOR T 141

CENTRAL AND EASTERN VISAYAS CENTRAL LUZON 1 SAMAR LEYTE

PNB Cebu Branch 2/F PNB Cabanatuan Branch Bldg. Mezzanine Flr., PNB Tacloban Branch
Tel. Nos.: (032) 255-1702 Cor. Paco Roman & Del Pilar Sts. Cor. Sto Nino and Justice Romualdez Sts.
Telefax No.: (032) 255-5787 Cabanatuan City, Nueva Ecija Tacloban City, Leyte 6500
Telefax (044) 463-0639 Telefax (032) 325-4619
JACINTO A. OUANO
Head EDGARDO L. PAPENA CONSUELO M. JAMORA
Head Head
PANAY
PNB Iloilo Branch CENTRAL LUZON 2 NEGROS
Tel. No.: (033) 337-1613 730 Sta. Rosario St. PNB Bacolod Branch
(033) 337-2476 Angeles City, Pampanga 2006 Lacson St., Bacolod City, Negros Occidental
(033) 336-4498 Tel. No. (045) 322-4004 Tel. No. (034) 434-5127
Telefax No.: (033) 337-5275 Fax No. (045) 887-4308 Telefax (034) 434-8712

LEOPOLDO F. MORAGAS JOSEPHINE D.G. SANTILLANA ELENA V. MENCHACA

Head Head Head

MINDANAO CAGAYAN VALLEY PANAY

PNB Davao Branch Maharlika Highway cor. Cabatuan Rd. 2/F, PNB Iloilo Branch
Tel. No.: (082) 221-2521 Cauayan, Isabela 3305 Cor. Gen. Luna and Valeria Sts.
Telefax No.: (082) 221-2521 Tel. No. (078) 652-1416 Iloilo City, Iloilo 5000
Telefax (078) 897-1700 Telefax (033) 337-5275
NICARDO M. LEOPOLDO
Head ALEJANDRO A. DINGCOG MILAGROS T. JERUTA (OIC)
Head Head
NORTHERN MINDANAO
PNB Cagayan de Oro Branch SOUTH LUZON 1 SOUTHERN MINDANAO
Tel. Nos.: (088) 856-3684 Mezzanine Flr., PNB Batangas Branch C.M. Recto St., Davao City 8000
(08822) 723-755 / 725-816 P. Burgos St. Batangas City Tel. No. (082) 221-3534
Telefax No.: (088) 856-3684 Tel. No. (043) 723-5660 Telefax (082) 305-4438
Telefax (043) 723-0050
NOEL M. NALZARO REYNALDO T. PAULINO
Head JOWER T. BUERANO Head
Head
SOUTHERN MINDANAO NORTHERN MINDANAO
PNB Davao Branch SOUTH LUZON 2 2/F, PNB Limketkai Branch
Tel. Nos.: (082) 224-2533 Marcos Paulino St., San Pablo City, Laguna Lapasan, Cagayan de Oro 9000
(082) 221-2053 Telefax (049) 562-0756 Tel. No. (08822) 729-801
(082) 221-0533 Fax No. (08822) 729-6337
Telefax No.: (082) 221-2521 ELAINE O. ARCEGA
Head JOHN O. LUGTU
FLORDELIZA M. MANEJA Head
Head BICOL
Gen. Luna St., Naga City, Camarines Sur WESTERN MINDANAO
Tel. Nos. (054) 473-1234 / 473-8245 MF, A. Eusebio Quadrangle
Fax No. (054) 473-9072 J.S. Alano St., Zamboanga City
REGIONAL CONSUMER Telefax (062) 991-0797
FINANCE CENTERS JOSEPH L. DELLOVA
Head LOLITO C. NGOHO
NORTH LUZON Head
2/F, PNB Dagupan Branch CEBU-BOHOL
AB Fernandez Ave., Dagupan City Mezzanine Flr., PNB Cebu Branch
Pangasinan 2400 Cor. Jakosalem and M.C. Briones Sts.
Telefax (075) 515-2744 Cebu City 6000
Telefax (032) 412-1797
MARILOU B. MARTINEZ (OIC)
Head MANUEL A. NAVALLO (OIC)
Head
142 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

SUBSIDIARIES AND AFFILIATES JAPAN-PNB LEASING AND FINANCE SINGAPORE
CORPORATION 304 Orchard Road
PNB CAPITAL AND INVESTMENT 6th Floor, Salustiana Ty Tower #03-02/07 Lucky Plaza Shopping Center
CORPORATION 104 Paseo de Roxas cor. Perea St. Singapore 238863
9th Floor, PNB Financial Center Legaspi Village, Makati City Tel. No.: (65) 6737-4646
Pres. Diosdado Macapagal Blvd. Tel. Nos. 892-5555 Telex: (General) RS21792 PNBSING,
Pasay City 1300 Fax No. 893-0032 (Treasury) RS23914 PNBSING
Tel. Nos. 834-0819 / 551-5811 / 5263131 Email: [email protected] Fax No.: (65) 6737-4224
loc. 4050 / 2398 / 1515 Email Add.: [email protected]
Fax No. 526-3270 OMAR BYRON T. MIER                  [email protected]
Email: [email protected] Chairman
[email protected] ALEX R. MILAN
ETSUO OKUMURA General Manager
FLORENCIA G. TARRIELA President
Chairman JURONG LIMITED PURPOSE
BENEFICIAL-PNB LIFE INSURANCE 130, Jurong East St. 13, #01-225
ANTONIO B. HERBOSA CO., INC Singapore 600130
President #166 Salcedo St., Legaspi Village Tel. No.: (65) 6899-5107
Makati City Fax No.: (65) 6899-6629
PNB SECURITIES, INCORPORATED Tel. Nos. 818-8671 Email Add: [email protected]
3rd Floor, PNB Financial Center Fax Nos.: 818-2291 to 95
Pres. Diosdado Macapagal Blvd. FARIDA SYED MOHD
Pasay City 1300 ENRIQUE C. FERNANDEZ In-Charge of Office
Tel. Nos. 526-3678 / 526-3478 Chairman
526-3510 NAGOYA SUB-BRANCH
Fax No. 526-3477 PATRICIO L. LIM 7th Floor JPR Nagoya Sakae Bldg., 3-24-24
E-mail: [email protected] Chairman Emeritus Nishiki, Naka-Ku, Nagoya-shi, Aichi-ken
460-0003 Japan
ERIC O. RECTO JOSE L. ARGUELLES Tel. No.: (8152) 968-1800
Chairman President Fax No.: (8152) 968-1102 / 1900
Email Add.: [email protected]
EMELITA S. RODEL                  [email protected]
Senior Manager & OIC OVERSEAS                  [email protected]

PNB HOLDINGS CORPORATION ASIA AND THE PACIFIC NATALIO G. NAGUIT

2nd Floor, PNB Financial Center Sub-Branch Manager
Pres. Diosdado Macapagal Blvd. HONGKONG
Pasay City 1300 26th Floor, Worldwide House SHENZHEN REPRESENTATIVE OFFICE
Tel. Nos. 573-4330 / 834-0787 19 Des Voeux Road, Central, Hong Kong Room 4001, Shenzhen International
Fax No. 526-3646 Tel. Nos: (852) 2543-1066 Trade Building, Ren Min Road
Trunkline: (852) 2543-7171 South, Shenzhen, 518005, China
JOSE NGAW Telex: 73019 PNB HK Tel. No.: (86) 755-82213596
Chairman & President Fax No.: (852) 2525-3107 Email Add.: [email protected]
(852) 2541-6645
PNB GENERAL INSURERS CO., INC. Email Add.: [email protected] RICHARD HU ZHONG LIANG
2nd Floor, PNB Financial Center                  [email protected] In-Charge of Office
Pres. Diosdado Macapagal Blvd.
Pasay City 1300 RITA C. BAUTISTA PNB INTERNATIONAL FINANCE LTD.
Tel. Nos. 526-3268 / 69 / 526-3635 / 41 / 43 General Manager (PNB IFL)
526-3658 / 551-2911 26/F, Worldwide House, 19 Des Voeux Road,
833-4572 / 6489 / 6592 TOKYO BRANCH Central, HongKong
Trunk Lines: 891-6040-70 5th Floor Fukide Bldg., 4-1-13 Tel. No.: (852) 2230-2105
locals 2302 / 2310 / 2318 Toranomon Minato-ku, Tokyo 105-0001, Japan Fax No.: (852) 2537-3772 / 2525-3107
4310-4322 / 4324-4331 / 4338 Tel. No.: (813) 5401-3300 / (813) 5401-3466 Email Add.: [email protected]
4340-4342 / 2025 (813) 5401-3751
Fax Nos. 526-3643 / 526-3640 / 46 Fax No.: (813) 5401-3634 / 5401-3560 RAYMOND A. EVORA
526-3069 5401-3627 General Manager
E-mail: [email protected] Email Add.: [email protected]
[email protected]
CIELO M. SALGADO                   [email protected]
Chairman
MASAO TAKAHASHI
ALLAN SD. STA. ANA Managing Director
Officer-In-Charge
 2007 ANNUAL REPOR T 143

PNB IFL - SHATIN PNB RCL WORLDWIDE HOUSE 101 PNB RCL TSUEN WAN
Shop 15E, Level 1, Shatin Lucky Plaza, Shop 101, 1/F Worldwide House, Shops 226-229, Lik San Plaza, 269 Castle
12-15 Wang Fok Street, Shatin 19 Des Voeux Road, Central, Hong Kong Peak Road, Tsuen Wan, New Territories
New Territories, Hong Kong Tel No.: (852) 2521-4603; Hong Kong
Tel. No.: (852) 2698-7458 Fax No.: (852) 2536-4281 Tel. No.: (852) 2490-1397
Fax No.: (852) 2698-7464 Email Add.: [email protected] Fax No.: (852) 2490-3435
Email Add.: [email protected]
DALE Q. DONATO MAXIMINO M. DELA CRUZ
Account Assistant Branch Manager CAYETANO S. MATEO
Branch Manager
PNB IFL - YUEN LONG PNB RCL WORLDWIDE HOUSE 122
Shop 9, 3/F Tung Yik Bldg., No.8 Yu King Shop 122, 1/F Worldwide House PNB RCL CAUSEWAY BAY
Square, Yuen long, New Territories, 19 Des Voeux Road, Central, Hong Kong Shops B18-19, Basement Level
Hong Kong Tel No.: (852) 2869-8764 Causeway Bay Shopping Centre
Tel. No.: (852) 2478-9301 Fax No.: (852) 2869-8599 15-23 Sugar St., Causeway Bay, Hong kong
Fax No.: (852) 2478-9611 Email Add.: [email protected] Tel. No.: (852) 2577-0553
Fax No.: (852) 2577-2004
CORAZON V. SUBANG SUSAN R. ROQUEL Email Add.: [email protected]
Account Assistant Branch Manager
LUMEN F. YEUNG
PNB IFL - STARHOUSE / KOWLOON PNB RCL YUEN LONG Branch Manager
Shop B-19, Starhouse Plaza, No. 3 Salisbury Shop 9, 3/F Tung Yik Bldg., No.8 Yu King
Road, Tsim Shat Sui, Kowloon, Hong Kong Square Yuen long, New Territories
Tel. No.: (852) 2735-2755 Hong Kong
Fax No.: (852) 2735-6069 Tel Nos.: (852) 2147-3471 USA AND CANADA
Fax No.: (852) 2147-3481
PNB CORPORATION, GUAM Email Add.: [email protected] LOS ANGELES
Suite 116, Concourse I, Micronesia Mall 3345 Wilshire Boulevard, Suite 200
W. Marine Drive, Dededo, Guam 96929 JOSE MARIA R. PONCE Los Angeles, California 90010, U.S.A.
Tel No.: (671) 637-4982 Branch Manager Tel. No.: (213) 401-1800
(671) 637-4987 Telex: 6502253656
Email Add.: [email protected] PNB RCL SHATIN Fax No.: (213) 401-1803
Shop 15E, Level 1 Shatin Lucky Plaza Email Add.: [email protected]
ALEX S. BATAC 12-15 Wang Fok St., Shatin                   [email protected]
Head of Office New Territories, Hong Kong
Tel No.: (852) 2603-2802 ANTONIO C. MADRID
PNB CORPORATION GUAM - SAIPAN Fax No.: (852) 2609-3816 General Manager
Unit 204, 2nd Floor JCT Bldg. 1, Beach Road, Email Add.: [email protected]
Susupe, Saipan MP 96950 NEW YORK
Tel No.: (670) 235-7249 / 50 ARIEL O. RUBIO 30 Broad St., 36th floor
             (670) 235-7261 Branch Manager New York, NY, 10004, U.S.A
Fax No.: (670) 235-7251 Tel. No.: (212) 790-9600 to 30
Email Add.: [email protected] PNB RCL NORTH POINT               (212) 790-9624
G/F Shop 27-28, Seven Seas Commercial Telex: 62703
CONSTANTINO F. POBRE Centre, 121 King’s Road, North Point Fax No.: (212) 382-2238
Head of Office Hong Kong Email Add.: [email protected]
Tel No.: (852) 2887-5967                  [email protected]
PNB REMITTANCE CENTER LTD. (RCL) Fax No.: (852) 2807-0298
- Head Office Email Add.: [email protected] PEDRO E. REYES III
26th Floor, Worldwide House, 19 Des Voeux General Manager
Road, Central Hong Kong BENILDA M. HO
Tel No.: (852) 2815-3643 Branch Manager HONOLULU
Fax No.: (852) 2525-3107 / 2541-6645 33 South King Street, Suite 109, Honolulu,
Email Add.: [email protected] PNB RCL STARHOUSE Hawaii 96813, U.S.A.
Shop B-19, Starhouse Plaza, No. 3 Salisbury Tel. No.: (808)-521-1493
ROLANDO C. CRUZ Road, Tsim Shat Sui, Kowloon, Hong Kong Telex: 662093
AVP & General Manager Tel. No.: (852) 2735 2755 Fax No.: (808) 533-2842
Fax No.: (852) 2735-6069 Email Add.: [email protected]
Email Add.: [email protected]                   [email protected]

FELICISIMA S. IP HERMELO Y. PAROT

Branch Manager General Manager
144 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

QUEENS (NY) EXTENSION OFFICE PNB RCI ARTESIA PNB RCI MORENO VALLEY
#69 - 18 Roosevelt Avenue, Woodside 17532A Pioneer Blvd., Artesia, CA 90701 24021 Alessandro Blvd., Suite 103-A
Queens, New York 11377, U.S.A. U.S.A. Moreno Valley, CA 92553
Fax No.: (718) 898-7833 Tel. No.: (562) 403-1188 / 89 Tel. No.: (951) 485-1095 / 96
Fax No.: (562)-403-1190 Fax No.: (951) 485-1212
FRANCISCO C. AGULTO Email Add.: [email protected] Email Add.: [email protected]
In-Charge of Office
FRANKLIN SARENAS VIRGINIA KING
PNB INTERNATIONAL INVESTMENTS Branch Manager Acting Branch Supervisor
CORP. (PNB IIC)
3345 Wilshire Boulevard, Suite 211, PNB RCI CARSON PNB RCI NATIONAL CITY
Los Angeles, California 90010, U.S.A. 131-F W. Carson St., Carson, CA 90745 2220 E. Plaza Blvd. Suite E, National City
Tel. No.: (213) 251-8090 / 251-8089 U.S.A. CA 91950, U.S.A.
Fax No.: (213) 251-8095 Tel. No.: (310) 549-8795 Tel. No.: (619) 472-5270
Email Add.: [email protected] Fax No.: (310) 549-8797 Fax No.: (619) 472-5790
Email Add.: [email protected] Email Add.: [email protected]
ANTONIO C. MADRID
EVP & Chief Operating Officer WILMYN ARMAS STEPHEN FAUSTINO GARCIA
Branch Manager Branch Manager
PNB RCI CARGO
3345 Wilshire Boulevard, Suite 230 PNB RCI EAGLE ROCK PNB RCI OXNARD
Los Angeles, California 90010, U.S.A. 2700 Colorado Blvd., #100, Los Angeles 3622 S. Saviers Road, Oxnard
Tel. No.: (213) 401-1338 CA 90041, U.S.A. CA 93033, U.S.A.
Tel. No.: (323) 254-3507 / 254-3259 Tel. No.: (805) 486-9759 / 1479
PNB RCI HOLDING CO. LTD. Fax No.: (323) 254-5889 Fax No.: (805) 486-1592
3345 Wilshire Boulevard, Suite 230 Email Add.: [email protected] Email Add.: [email protected]
Los Angeles, California 90010, U.S.A.
Tel. No.: (323) 802-8050 loc. 7780 JHOANNA M. CUNANAN MERLY S. STA. MARIA
Fax No.: (323) 802-8011 / 12 Branch Operations Supervisor Branch Manager
Email Add.: [email protected]
PNB RCI LONG BEACH PNB RCI PANORAMA CITY
ROMMEL R. GARCIA 1358 W. Willow St., Long Beach 14417 Roscoe Blvd. Unit D, Panorama City
President & CEO CA 90810, U.S.A. CA 91402, U.S.A.
Tel. No.: (562) 492-5909 Tel. No.: (818) 891-2928 / 2946
PNB REMITTANCE CENTERS, INC. (RCI)              (562) 989-1562 Fax No.: (818) 891-0838
- HEAD OFFICE Fax No.: (562) 492-5939 Email Add.: [email protected]
3345 Wilshire Blvd., Suite 230, Los Angeles, Email Add.: [email protected]
CA 90010, USA JOHN RODRIGUEZ
Tel. No.: (213) 401-1008 MICHELLE SISON Branch Manager
Fax No.: (213) 401-1208 Branch Operations Supervisor
Email Add.: [email protected] PNB RCI RANCHO CUCAMONGA
                  [email protected] PNB RCI LOS ANGELES 8956 Foothill Blvd., Suite C1-B
3343 Wilshire Blvd., Los Angeles Rancho Cucamonga, CA 91730, U.S.A.
ROMMEL R. GARCIA CA 90010, U.S.A. Tel. No.: (909) 476-9494/ 9279
President & CEO Tel. No.: (213) 401-1808 Fax: (909) 476-9459
Fax No.: (213) 401-1809 Email Add.: [email protected]
PNB RCI ANAHEIM Email Add.: [email protected]
825-C N. Euclid St., Anaheim, CA 92801 RUSSEL JURINARIO
U.S.A. ARLENE LEE Branch Supervisor
Tel. No.: (714) 563-1646 Branch Operations Supervisor
Fax No.: (714) 563-1785 PNB RCI WEST COVINA
Email Add.: [email protected] PNB RCI MIRA MESA 1559-K E. Amar Road, West Covina
9007 Mira Mesa Blvd., San Diego CA 91792, U.S.A.
MARYJANE MONTEMAYOR CA 92126, U.S.A. Tel. No.: (626) 854-2044 / 45
Branch Operations Supervisor Tel. No.: (858) 549-1253 Fax No.: (626) 854-2046
Fax No.: (858) 549-1346 Email Add.: [email protected]
Email Add.: [email protected]
MARY JANE SOTELO
MENCHU BOLANOS Person-In-Charge
Branch Manager
 2007 ANNUAL REPOR T 145

PNB RCI PHOENIX PNB RCI VALLEJO PNB LAS VEGAS SAHARA
2941 W. Bell Road Ste. 3, Phoenix 36 Springtowne Center, Vallejo Sahara Towne Square, 2600-A S. Maryland
AZ 85053, U.S.A. CA 94591, U.S.A. Parkway, Las Vegas NV 89109, U.S.A.
Tel. No.: (602) 942-4216 / 4363 Tel. No.: (707) 558-9575 Tel. No.: (702) 650-5263 / 6429
Fax No.: (602) 942-4374              (707) 644-6329 Fax No.: (702) 650-6448
Email Add.: [email protected] Fax No.: (707) 558-9577 Email Add.: [email protected]
Email Add.: [email protected]
ROMEO TAN AZELA MABASA
Branch Supervisor CARMENCHU LIM Branch Supervisor
Branch Manager
PNB RCI DALY CITY PNB RCI HOUSTON
6730 Mission Blvd., Unit A, Daly City PNB RCI CHICAGO Beltway Plaza Shopping Center
CA 94014, U.S.A. 5918 N. Clark St., Chicago, IL 60660, U.S.A. 8388 West Sam Houston Parkway
Tel. No.: (650) 756-1268 / 1492 Tel. No.: (773) 784-2951 / 53 Suite 194, Houston, Texas 77072, U.S.A.
Fax No.: (650) 756-1409 Fax No.: (773) 784-2952 Tel. No.: (281) 988-7575 / 7001
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (281) 988-7555
Email Add.: [email protected]
ROMEO A. ANCHETA CHRISTOPHER P. ORTIZ
Officer-In-Charge Branch Manager SHIRLEY ANN CAMACHO
Branch Manager
PNB RCI SACRAMENTO PNB RCI HOFFMAN ESTATES
6914 65th St., Suite 305, Sacramento 1028 W. Golf Road, Hoffman Estates PNB RCI DALLAS
CA 95823, U.S.A. IL 60169, U.S.A. 940 East Belt Line Ste. 130, Richardson
Tel. No.: (916) 424-9588 / 89 Tel. No.: (847) 885-7405 / 7407 TX 75081, U.S.A.
Fax No.: (916) 424-9590 Fax No.: (847) 885-7412 Tel. No.: (972) 470-9910 / 12
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (972) 470-9915
Email Add.: [email protected]
AIDA DE VEGA BELMO MARTIL
Branch Manager Branch Supervisor MARIFE FERNANDEZ
Person-In-Charge
PNB RCI SAN FRANCISCO PNB RCI NILES
One Sutter St., Mezzanine Flr. 7315 West Dempster, Niles, IL 60714, U.S.A. PNB RCI NORTHWEST HOUSTON
San Francisco, CA 94104, U.S.A. Tel. No.: (847) 583-0352 13480 Veterans Memorial Dr.
Tel. No.: (415) 392-0502              (847) 663-9360 Suite P-5 Houston, TX 77014, U.S.A.
Fax No.: (415) 392-0503 Fax No.: (847) 583-0353 Tel. No.: (281) 880-7560 / 67
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (281) 880-7007
Email Add.: [email protected]
SINFOROSA BUSTRIA ROMAN RUYERAS, JR.
Branch Manager Branch Supervisor JESUS YAP
Branch Supervisor
PNB RCI SAN JOSE PNB RCI WOODRIDGE
1983 Quimby Road, San Jose 2441-57 W 75th St, Woodridge Plaza PNB RCI SEATTLE
CA 95122, U.S.A. Woodridge, IL 60517, U.S.A. 6044 M.L. King Jr. Way So. #107
Tel. No.: (408) 929-0964 / 65 Tel. No.: (630) 985-7880 Seattle WA 98118, U.S.A.
Fax No.: (408) 929-0966 Fax No.: (630) 985-7883 Tel. No.: (206) 722-2890 / 2945
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (206) 722-2958
Email Add.: [email protected]
AILEEN LAYANTE AIDA ZORAIDA GRANDE
Branch Manager Branch Supervisor CECILIA TERESITA V. FLORES
Branch Manager
PNB RCI UNION CITY PNB RCI LAS VEGAS
32128 Alvarado Blvd., Union City 3890 S. Maryland Parkway, Ste. G PNB RCI WAIPAHU
CA 94587, U.S.A. Las Vegas, NV 89119, U.S.A. 94-226 Leoku Street, Waipahu
Tel. No.: (510) 487-6272 / 73 Tel. No.: (702) 474-9008 / 9062 Hawaii 96797, U.S.A.
Fax No.: (510) 487-6330 Fax No.: (702) 474-9068 Tel. No.: (808) 678-3360
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (808) 678-3302
Email Add.: [email protected]
ROMEO ANCHETA THERESA C. OLAN
Branch Manager Branch Manager ARCELI SAGAOINIT
Branch Supervisor
146 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

PNB RCI JERSEY CITY PNB RCI MIAMI PNB RCC VANCOUVER BRANCH
689 Newark Avenue, Jersey City 255 East Flagler Street, Suite 213 1513 W. Broadway, Vancouver
NJ 07306, U.S.A. Miami, FL 33133, U.S.A. BC V6J 1W6, Canada
Tel. No.: (201) 656-3270 / 3953 Tel. NO.: (786)425-9560 Tel. No.: (604) 737-4944
Fax No.: (201) 656-7164 Fax No.: (786)425-9561 Fax No.: (604) 737-4948
Email Add.: [email protected] Email Add.: [email protected] Email Add.: [email protected]
                  [email protected]
CARMEN HERMOSISIMA VERONICO VICERA
Branch Manager Person-In-Charge KAY CABIGAS
Branch Supervisor
PNB RCI BERGENFIELD PNB REMITTANCE COMPANY
107 N. Washington Avenue, Bergenfield, (CANADA) PNB RCC WINNIPEG BRANCH
New Jersey 07621, U.S.A. c/o PNB RCC Mississauga Branch (MARKETING OFFICE)
Tel. No.: (201) 387-0077 Email Add.: [email protected] 737 Keeratin Street, Unit 7, Winnipeg
Fax No.: (201) 387-1112              [email protected] Manitoba, Canada R2X 3B9
Email Add.: [email protected] Tel. No.: (204) 697-8860
MANOLO A. ARNALDO Fax No.: (204) 697-8865
DANILO LOZANO VP & COO Email Add.: [email protected]
Branch Supervisor
PNB RCC EGLINTON BRANCH ALLAN RAFAL
PNB RCI MARYLAND 875 Eglinton Ave. West Unit 15, Toronto Marketing Officer
9213 Oxon Hill Road, Fort Washington Ontario, M6C 3Z9, Canada
Maryland 20744, U.S.A. Tel. No.: (416) 782-2438/782-5585
Tel. No.: (301) 567-8244 / 45                782-0760/782-3533 / 782-1896
Fax No.: (301) 567-8246 960-8488 EUROPE AND MIDDLE EAST
Email Add.: [email protected] Fax No.: (416) 784-5155
Email Add.: [email protected] HAMBURG REPRESENTATIVE OFFICE
MELCHOR L. REYES, JR. Rosenstrasse 7, 20095 Hamburg, Germany
Branch Manager ROLAND ROMERAL Tel. No.: (49) 40-326-252
Branch Supervisor              (49) 40-326-303
PNB RCI VIRGINIA BEACH Fax No.: (49) 40-321-184
5350 Kemps River Drive, Suite 116 PNB RCC MISSISSAUGA BRANCH Email Add.: [email protected]
Virginia Beach, VA 23464, U.S.A. 90 Dundas Street W. Unit 103 [email protected]
Tel. No.: (757) 424-1592 Mississauga, Ontario L5B 2T5, Canada [email protected]
Fax No.: (757) 424-1595 Tel. No.: (905) 268-0580/ 268-0753
Email Add.: [email protected]     896-9743/ 896-8010 / 896-4840 ELIZABETH L. GOMEZ
Fax No.: (905) 896-9338 Sr. Assistant Manager & Bank Representative
CHERYL DAVID Email Add.: [email protected]
Branch Supervisor PARIS REPRESENTATIVE OFFICE
SUSANA AUSTRIA 165 Avenue Victor Hugo
PNB RCI JACKSONVILLE Officer-In-Charge 75016 Paris, France
10916 Atlantic Blvd., Unit 5 Tel. No.: (0033) 14505 3400
Jacksonville, FL 32225, U.S.A. PNB RCC SCARBOROUGH BRANCH Fax No.: (0033) 14505 1951
Tel. No.: (904) 564-2555 / 01 3430 Sheppard Ave., East, Scarborough Email Add.: [email protected]
Fax No.: (904) 564-2530 ON M1T 3K4, Canada
Email Add.: [email protected] Tel. No.: (416) 293-5438 / 293-5696 CRISPIN SAUNDERS
Fax No.: (416) 293-7376 Officer-In-Charge
ANDREW SANTIAGO Email Add.: [email protected]
Branch Supervisor ROME REPRESENTATIVE OFFICE
LYSSA BORABON Via Torino n. 135, Palazzina, Interna
PNB RCI TAMPA Branch Supervisor Int. 5/6 (2nd Floor), 00184 Rome, Italy
8502 N. Armenia Avenue, Suite 4B Tel. Nos.: (3906) 482-7830
Tampa, FL 33604, U.S.A. PNB RCC SHERBOURNE BRANCH (3906) 482-7841
Tel. No.: (813) 933-5335 / 36 545 Sherbourne St., Toronto M4X 1W5 Fax No.: (3906) 482-7884
Fax No.: (813) 933-5330 Ontario, Canada Email Add.: [email protected]
Email Add.: [email protected] Tel. No.: (416) 960-9231 / 960-8004                   [email protected]
Fax No.: (416) 960-8688                   [email protected]
MEIJI HOPE KHO Email Add: [email protected]
Person-In-Charge ISABELITA T. MANALASTAS-WATANABE
MARY GRACE LETRONDO Bank Representative, FSVP & Sector Head
Branch Supervisor (Europe Region, Israel & African Continent)
 2007 ANNUAL REPOR T 147

PNB (EUROPE) PLC PNB ITALY SPA PNB NETHERLANDS B.V.

Ground Floor, Old Change House Via Torino n. 135, Palazzina Interna 6th Flr. Tower B
128 Queen Victoria St., London Int. 5/6 (2nd Floor), 00184 Rome, Italy World Trade Center Amsterdam,
EC4V 4BJ, United Kingdom Tel. No.: (3906) 482-7830 Strawinskylaan 633,1077XX Amsterdam
Tel. No.: (44) 20-7397-1340 / 41              (3906) 482-7841 The Netherlands
             (44) 20-7397-1377 Fax No.: (3906) 482-7884 Tel No.: (31) 20-620-2111
Telex: 881-2797 Email Add.: [email protected]              (31) 20-627-3661
Fax No.: (44) 20-7653-1403                   [email protected] Fax No.: (31) 20-625-1076
Email Add.: [email protected]                   [email protected] Email Add.: [email protected]
                  [email protected]
RONALD O. SIPAT ANTONIO A. LATORRE, JR.
SAVP & Managing Director ISABELITA T. MANALASTAS- WATANABE Officer-In-Charge
Managing Director, FSVP & Sector Head
PNB (EUROPE) PLC - PARIS BRANCH (Europe Region, Israel & African Continent) PNB ROTTERDAM EXT. OFFICE
165 Avenue Victor Hugo, 75016 Paris, France Groot Handelsgebouw, A2, 003
Tel. No.: (0033) 14505 3400 PNB ITALY SPA - FLORENCE BRANCH (Unit A 2nd Flr. Room. No. 3), Stationsplein
Fax No.: (0033) 14505 1951 Piazza San Giovanni, 5, Florence, Italy 50129 45 3013 AK Rotterdam
Email Add.: [email protected] Tel. No.: (39055) 295-056 Telefax: (010) 429-7755
                 [email protected] Fax no.: (39055) 230-2137 Email Add.: [email protected]
Email Add.: [email protected] [email protected]
ROBERTO E. RAMOS                   [email protected]
Head of Office ANTONIO A. LATORRE, JR.
ROGEL E. CABIGTING Officer-In-Charge
PNB (EUROPE) PLC - NOTTINGHILL Officer-In-Charge
GATE EXT. OFFICE DUBAI REPRESENTATIVE OFFICE
No. 10 Pembridge Road, London W11 3HL PNB ITALY SPA - MILAN BRANCH Room No. 108, First Floor
United Kingdom Via Dogana, 3, 20123 Milan, Italy Al Nakheel Building, Zaabeel Road
Tel. No.: (44) 20-7792-9647 Tel. No.: (3902) 7200-3917 Karama, P.O. Box 52357, Dubai, U.A.E
             (44) 20-7397-1377 Fax No.: (3902) 7200-3957 Tel No.: (971) 4-3365-940
             (44) 20-7397-1341 Email Add.: [email protected] Fax No.: (971) 4-3374-474
Fax No.: (44) 20-7792-9812 Email Add.: [email protected]
Email Add.: [email protected] VIRGILIO A. BANGGAO                   [email protected]
                  [email protected] Head & Operations Officer                   [email protected]
[email protected]
RONALD O. SIPAT PNB GLOBAL FILIPINO REMITTANCE
Managing Director SPAIN, S.A. AMROUSSI T. RASUL
Calle Mayor 6-3 - Pta.2 First Vice President
NESTOR P. PASCUAL 28013 Madrid, Spain
Operations Head Tel No.: (0034) 91-532-5021 KUWAIT MARKETING OFFICE
             (0034) 91-532-5462 No. 363 Area 10, Police Station St.
PNB AUSTRIA FINANCIAL SERVICES Fax No.: (0034) 91-532-4992 Jabriyah, P.O. Box 26288, Safat 13123
GMBH Email Add.: [email protected] Tel. No.: (965) 532-9316 / 17 Local 210
Opernring 1, Stiege E, Top 131 Fax No.: (965) 532-9318 / 19
A-1010 Vienna, Austria ARAW F. BERNABE Email Add.: [email protected]
Tel. No.: (431) 532-0510 Head of Office
Fax no.: (431) 532-0521 LAMBERTO G. PANTANILLA
Email Add.: [email protected] PNB GLOBAL FILIPINO REMITTANCE Marketing Officer
                 [email protected] SPAIN, S.A.- BARCELONA BRANCH
Edificio Sta. Lucia Calle Fontanella AL-KHOBAR DESK OFFICE
JOVITO B. CRUZ 12 - 1st Floor, Room E, Barcelona, Spain Al Khobar Telemoney Center, King Faisal St.,
Head of Office Tel No.: (0034) 93-304-3580 1st Crossing (Beside Glorietta Bldg.), P.O. Box
             (0034) 93-317-1486 37 Al Khobar 31952,
Fax No.: (0034) 93-317-1486 Kingdom of Saudi Arabia
Email Add.: [email protected] Tel No.: (966) 3-894-2618
Fax No.: (966) 3-894-1546
ARAW F. BERNABE Email Add.: [email protected]
Head of Office
MODESTO F. DE GUZMAN
Desk Officer
148 P H I L I P P I N E N A T I O N A L B A N K

Directory of BRANCHES AND OFFICES

AQARIA DESK OFFICE JUBAIL DESK OFFICE RIYADH DESK OFFICE
Akaria Telemoney Center, Akaria Shopping Jubail Telemoney Center, Jeddah St. Arab National Bank - Head Office,
Center, Olaya Road, Riyadh Across Riyad Bank, P.O. Box 351 Jubail 31941 5th Flr., Rm 536, Aqaria Bldg. 2, Olaya St.
Kingdom of Saudi Arabia K.S.A. P.O. Box 56921, Riyadh 11564, KSA
Tel. No.: (966) 1-402-9000 Ext. 4864 Tel. No.: (966) 3-362-0093 Tel. No.: (966) 1-402-9000 Ext. 3371
Fax No.: (966) 1-460-1377 Fax No.: (966) 3-362-0464 & 3340
Email Add.: [email protected] Email Add.: [email protected] Fax No.: (966) 1-402-9000 Ext. 4890
Email Add.: [email protected]
UNGKAL “ALI” A. NOH DENNIS G. LEAL                   [email protected]
Marketing Officer Marketing Officer                   [email protected]

HAIL DESK OFFICE KHAMIS MUSHAYT DESK OFFICE USMAN B. NAVARRO

King Khalid St. Hail, Kingdom of Saudi Arabia Khamis Mushayt Telemoney Center, Country Head
Tel No.: (966) 6-538-2534 King Fahd St., Opposite Al Azizia Hotel,
Fax No.: (966) 6-538-2576 Khamis Mushayt, Kingdom of Saudi Arabia HANI S. DIGA
Email Add.: [email protected] Tel. No.: (966) 7-223-3578 / 223-1890 Roving Marketing Officer
Fax No.: (966) 7-223-6226
CYRIL B. INDANAN Email Add.: [email protected] TABUK DESK OFFICE
Marketing Officer Tabuk Telemoney Center, Shara Al Amn,
ANGEL A. DOMINGO Near Gov. Basheer House, Tabuk, KSA
HERA’A DESK OFFICE Marketing Officer Tel. No.: (966) 4-423-0848
Hera’a Telemoney Center, Madin Road, Fax No.: (966) 4-423-0844
Hera’a Mall, Hera’a, Jeddah, YANBU DESK OFFICE Email Add.: [email protected]
Kingdom of Saudi Arabia Yanbu Telemoney Center
Tel. No.: (966) 2-655-0665 / 607-3461 Khair Baladi Int’l. Market, Yanbu CARLITO J. GASPAR
Fax No.: (966) 2-607-3468 Kingdom of Saudi Arabia Marketing Officer
Tel. No.: (966) 4-3226201
SHAMIE A. MANCAO Fax No.: (966) 4-3227626 TAIF DESK OFFICE
Marketing Officer Email Add.: [email protected] Taif Telemoney Center, Shubra Area, Taif, KSA
Tel. No.: (966) 2-734-7421
HOFUF DESK OFFICE AARON U. MOLANO Fax No.: (966) 2-732-0448 Ext. 111
Hofuf Telemoney Center, Meidan Al Khamis Marketing Officer
Hofuf, Kingdom of Saudi Arabia VICTORINO G. RAZALAN
Tel. No.: (966) 3-586-2890 RABIGH DESK OFFICE Marketing Officer
Fax No.: (966) 3-584-7330 Rabigh K.S.A.
Tel. No.: (966) 2-4230-368 MALAZ DESK OFFICE
ABDULLAH P. GACUAN Fax no.: (966) 2-4223-967 Malaz Telemoney Center, Jareer St.
Marketing Officer Email Add.: [email protected] Malaz, Riyadh, KSA
Tel. No.: (966) 1-206-5285
JAMA’A DESK OFFICE ANWAR L. ABDUL Fax No.: (966) 1-206-5214
Jama’a Telemoney Center, Hai Jama Marketing Officer
Jeddah, Kingdom Saudi Arabia JOSEPHINE D. FRANCISCO
Tel. No.: (966) 2-6813804 / 6813802 RIYADH BATHA DESK OFFICE Marketing Officer
Fax No.: (966) 2-6813806 Riyadh-Batha Telemoney Center,
Riyadh Trading Center, DHARAN-ALKHOBAR DESK OFFICE
LUISITO F. BANTING Batha (Filipino Market), KSA Dharan-Alkhobar Telemoney Center
Marketing Officer Tel. No.: (966) 1-402-9000 Dharan St., Alkhobar, KSA
              Ext. 5050/5051 Tel. No.: (966) 3-8691484
JEDDAH DESK OFFICE               sub-ext 6213/6217 Fax No.: (966) 3-869-0789
Balad-Jeddah Telemoney Center, Fax No.: (966) 1-2831-553
Aswaq Building, Corniche, Balad District, Email Add.: [email protected] FEDERICO S. CANDA
Jeddah, Kingdom of Saudi Arabia Marketing Officer
Tel. No.: (966) 2-643-3415 / 642-2578 TEODORICO C. AMPARO
Fax No.: (966) 2-643-3173 Desk Officer
Email Add.: [email protected]

ROBERTO H. R. CONSTANTINO
Desk Officer
The 2007 Annual Report is published by Philippine National Bank.
Concept and design by OP Communications, Inc.
Photography by Noby Cabañero

A copy of this report may be downloaded from www.pnb.com.ph

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